Ericsson Slashes Work Force

Swedish telecom equipment manufacturer Telefon AB L.M. Ericsson on Monday announced that the company is axing about 20 percent of its work force, following a tough financial first quarter.

Officials at the Stockholm-based company said that Ericsson had a net loss of 2.97 kronor for the quarter, as compared with a net profit of 424 million kronor for the first quarter last year. Officials dont expect things to get better any time soon.

“As expected, this past quarter was very challenging,” CEO Kurt Hellstrom said in a statement. “Many operators have recently lowered investment plans further. As sales will be lower than anticipated, with ongoing aggressive cost cutting we plan to return to profit at some point in 2003.”

The company plans to reduce its work force to 65,000 by cutting 7,000 jobs this year and 10,000 more next year, officials said.

Network equipment sales have continued to decline, Hellstrom said, attributing this to decreasing demand for older circuit-switched networks and not enough new demand for packet-switched networks. He said he expects the promise of multimedia services to bolster the sales of mobile systems once carriers make 3G networks more readily available.

The company fared better with handsets. The joint venture with Sony Corp., Sony Ericsson shipped 5.8 million phones and broke even for the quarter, Hellstrom said.

Rival Nokia Corp. has a tough road ahead, too. Nokias first-quarter sales declined by 12 percent compared with the first quarter 2001. Sales for mobile phones decreased by 7 percent compared with the previous year, and sales for Nokia Networks went down 29 percent. The Espoo, Finland, company last week slashed its forecast, warning group sales would grow only between 4 percent and 9 percent in 2002, after a previous growth forecast of 15 percent. Nokia expects to sell up to 420 million handsets this year; this is down from a previous estimate of as many as 440 million.