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Ericsson announces plans to reduce its Swedish workforce as the vendor looks to improve profitability

Ericsson Sheds 1,550 Staff in Sweden

Michelle Donegan
News Analysis
Michelle Donegan
11/7/2012
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Ericsson AB (Nasdaq: ERIC) is reducing its operations in Sweden and cutting 1,550 jobs in the country as part of its ongoing efforts to improve profitability. (See Ericsson Cuts 1,550 Jobs.)

The headcount reduction represents 8.7 percent of the vendor's 17,768 employees in Sweden, and 1.4 percent of its total global workforce, which was 109,214 at the end of September.

The vendor maintains that the reductions announced Wednesday do not signal a broader cost-cutting program. According to an Ericsson spokeswoman, the company is working globally to improve profitability through various activities, including job cuts in some markets. (See Ericsson Trims North America Workforce.)

Most of the job cuts in Sweden will be in the company's Networks business unit, but all parts of the company will be affected, including sales, general and administration, research and development, supply and service delivery.

That the Networks business will be hit hardest is no surprise because it is the biggest part of Ericsson's operation in Sweden in terms of employee numbers, and it is the unit that is having the toughest time financially. In the third quarter, Ericsson's revenues in its Networks unit were down 17 percent year-on-year, to 26.9 billion Swedish kronor (US$4 billion). (See Ericsson Feels Networks Squeeze in Q3.)

Ericsson's long-term goal is to return the Networks business to double-digit margins, but "we're a long way from that," said the company's spokeswoman.

Ericsson's head of human resources in Sweden, Tomas Qvist, explained in a statement that sometimes redundancies are "unfortunately inevitable."

He added: "We must ensure that we can continue to execute on our strategy to maintain our market leadership, invest in R&D and meet our customers' needs. To secure this we need to focus on reducing cost, driving commercial excellence and operational effectiveness. This will enable us to secure our future competitiveness.

"Over the past couple of years we have been continuously driving these global efficiency measures across regions and units."

Ericsson isn't the only equipment vendor having to cut its workforce recently: Nokia Networks is in the process of shedding 17,000 jobs globally, while Alcatel-Lucent (NYSE: ALU) plans to cut about 5,500 jobs. (See NSN to Cut 17,000 Staff, AlcaLu Job Cuts to Hit 5,500 and Euronews: AlcaLu Needs to Shed 10,000 More.)

— Michelle Donegan, European Editor, Light Reading Mobile

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