BBC - Friday, 20 April, 2001, 10:47 GMT 11:47 UK

Ericsson cuts 12,000 jobs

A sharp slowdown in handset sales has hit Ericsson hard Swedish telecoms equipment maker Ericsson is to cut 12,000 jobs worldwide, from a workforce of 100,000.

The company is to axe a further 2,000 jobs in its consumer products division, on top of 10,000 largely white collar redundancies announced on Friday morning.

More than half of the job losses will come outside Sweden, but the company has not confirmed where they will fall.

Union officials in the UK were due to meet the company on Friday to find out how many British jobs will go.

The announcement is the latest in a series of cutbacks in the telecom industry, and follows figures from Ericsson showing huge first quarter losses.

Hard-pressed manufacturers

Job cuts had been widely expected as Ericsson, which is the world's third largest mobile phone maker and the leading manufacturer of mobile network equipment, attempts to trim mounting losses.

But the scale of the redundancies has taken analysts and unions by surprise.

The company said the redundancies could trigger similar moves by other hard-pressed handset manufacturers.

An Ericsson spokesman told BBC Breakfast the telecoms giant was adjusting its size to the "new realities in the telecom market worldwide."

"It is clear the impact in the United States is spilling over into Europe," he added.

Earlier this week, Ericsson confirmed it is in talks with Japanese electronics giant Sony over the integration of their mobile handset businesses.

First-quarter losses

Ericsson's announcement comes as Finnish rival Nokia, the world's largest mobile phone maker, posted better than expected first-quarter profits, up 6% at 1.41 billion euros (£863m).

Last month, Ericsson announced it was axing 3,300 jobs worldwide - a measure including the closure of two UK factories, with the loss of 1,200 jobs.

The latest job cuts bring the total number of redundancies to 15,500, about 14% of Ericsson's global workforce.

The company said it would not know for another two weeks where the latest cuts would fall.

Amalgamated Engineering & Electrical Union national officer Bob Shannon said: "We have made it clear to Ericsson that they cannot keep cutting jobs in this country.

"It is essential that the firm holds its nerve in the face of the current problems."

Ericsson said it was planning to cut back on its 15,000 freelance consultants but would try to avoid cutting jobs in research and development (R&D).

It is also expected to cut back on sales and administration staff.

The latest round of job cuts came as Ericsson posted a first quarter pre-tax loss of 4.9 billion Swedish crowns (£333m) against market expectations of a 5.05 billion crown loss.

Economic downturn

The company said sales had fallen 5% and it was unlikely to improve its performance in the second quarter of the year.

Kurt Hellström, president and chief executive said: "A general economic downturn and an abruptly slower telecom sector are affecting our customers as well as us.

"Many operators are postponing their investments, which has resulted in an overall reduction in sales."

He added: "For the consumer products division we still have our objective to get back to profit in the second half of the year.

"The objective stands, but the reality is what we have to fight with.

"We have taken cost-cutting measures to adapt to a situation where we don't see any improvement in market conditions for the rest of the year."

Ericsson shares fell 11% in early trading on Friday.

Long-term outlook

The company said it wanted a business that was smaller and more manageable, with less exposure to risk.

It said it expected the market for mobile network infrastructure to grow at a slower pace in the short term, reflecting uncertainty in world markets.

But its long-term outlook remains optimistic and it maintained its forecast of worldwide mobile subscriber growth of 25% to 35%, leading to between 920 and 950 million subscribers by the end of 2001.

In January, Ericsson announced it was pulling out of handset manufacture.

The firm said it would continue its mobile phone R&D and marketing activities, while handset production would be outsourced.

-- Anonymous, April 20, 2001