Ericsson to Cut 2,200 Swedish Jobs

Ericsson is to cut 2,200 jobs in Sweden as part of its latest savings and restructuring plan to support growth and bolster profitability, the company said in a statement.

The number represents just less than 2% of Ericsson AB (Nasdaq: ERIC)'s global workforce and more than 13% of its employee base in Sweden.

Most of the affected jobs will be in the R&D and supply departments, but there will be cutbacks in sales, general areas and administration as well. Ericsson also intends to reduce the number of external consultants it has been using and to slash IT costs by consolidating resources at three global ICT centers.

The Swedish vendor is hoping to cut expenses by as much as 9 billion Swedish kronor ($1.05 billion) in 2017 but expects to realize some savings across all of its various activities this year.

However, it has warned investors that restructuring efforts usually generate costs of about SEK2 billion ($230 million) and that its current efficiency program will add another SEK3-4 billion ($350-470 million) to the bill over the 2015-17 period.

Ericsson's latest strategy is to focus resources on a number of growth opportunities -- including IP networks, cloud, TV and media, OSS and BSS and industry and society -- and the cost-cutting program is designed to support this plan.

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The vendor's workforce has already seen changes that reflect its new priorities. Last year, Ericsson laid off more than 15,000 staff members but recruited another 19,000 for a net gain of 4,000. It had a total of 118,000 employees on its payroll at the end of the year, 25,700 of whom were engaged in R&D activities. (See Ericsson Feels US Capex Squeeze in Q4.)

Despite several rounds of restructuring, employee numbers have continued to mushroom at Ericsson, growing by nearly 50% between 2008 and 2014. With sales flat-lining in recent years, revenues per employee have fallen by more than 27% over the same period.

Table 1: Ericsson's Sales and Staff Numbers

2014 2013 2012 2011 2010 2009 2008
Employees 118,055 114,340 110,255 104,525 90,261 82,493 78,740
Revenues (SEK B) 228.0 227.4 227.8 226.9 203.3 206.5 208.9
Revenues ($B) 26.5 26.4 26.5 26.4 23.6 24.0 24.3
Revenue per employee ($) 224,472 230,890 240,352 252,571 261,464 290,934 308,611
Source: Ericsson

Even so, Ericsson's recent sales performance compares relatively favorably with those of Alcatel-Lucent (NYSE: ALU) and Nokia Networks , its key Western rivals, which flagged year-on-year declines of 3% and 1% respectively in 2014. All three players continue to lag China's Huawei Technologies Co. Ltd. , whose revenues grew by about 20% in 2014, to $46.5 billion. (See Alcatel-Lucent Reports Marginal Progress, Nokia Ends 2014 on a High and Huawei Expects 2015 Revenues of $56B.)

A bright spot in Ericsson's 2014 results was an increase in revenues from the growth opportunities it is prioritizing. Sales across these areas were up by 10%, to roughly SEK33 billion ($3.84 billion), compared with 2013.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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