Ericsson beats market blues, will still lay off 5,000 bracing for 2009

Swedish telecom equipment maker Ericsson has released a stronger-than-expected fourth-quarter profit, though the announcement comes along with a foreboding of axing around 5,000 jobs.

Releasing its numbers over a week ahead of what was originally scheduled, Ericsson did not provide a specific business outlook for what it sees ahead for itself. The telecommunications giant made an operating profit of 9.2 billion Swedish crowns ($1.1 billion) in the quarter, not including restructuring costs of 3.0 billion Swedish crowns, though inclusive of a capital gain of 0.8 billion.

Ericsson said its profits dropped 31 per cent during the fourth quarter, on account of restructuring charges and weaker handset sales. Ericsson's rivals Nokia, Siemens Networks, and Alcatel-Lucent have all said that the market would shrink in 2009, as telecoms operators cap off spending and Asian rivals pressure their pricing.

Earlier in the month, Nortel Networks Corp, one of the largest telecom equipment makers in North America filed for bankruptcy.

Ericsson's report said that sales were up to 67.0 billion from 54.5 billion a year ago.

CEO Carl-Henric Svanberg was reported as saying that there was good global demand for Ericsson's entire portfolio though currency movements were a factor during the fourth quarter. The Swedish crown had weakened sharply in late 2008.

In a statement, Svanberg said "To date, our infrastructure business is hardly impacted at all, but it would be unreasonable to think that this would be the case also throughout 2009."

Consequently, it comes as no surprise that Ericsson announced cost-savings efforts and the axing of 5,000 jobs. This follows cost cuts of 4 billion crowns from a year ago.

"Cost savings will continue also in 2009. Restructuring charges are estimated to 6-7 billion crowns and annual savings of 10 billion crowns are expected by the second half of 2010, with an equal split between cost of sales and operating expenses," the company said.