Ericsson to lay off 5,000 workers

The telecoms infrastructure firm Ericsson is to lay off 5,000 workers, after its results for the fourth quarter of 2008 showed a 31 percent year-on-year drop in profits.

The results came out on Wednesday, with profits in the fourth quarter of 2008 totaling 3.9bn Swedish kronor (£341m) — down from SEK 5.6bn in the corresponding quarter of 2007. Ericsson blamed the drop on restructuring charges and a "dramatic drop in the contribution" from Sony Ericsson, which is Ericsson's handset-manufacturing joint venture with Sony.

Sony Ericsson's fourth-quarter results, which came out last week, showed losses of €187m (£125m), prompting analysts to predict that 2009 will be a "deciding year" for the company. According to Wednesday's results statement, the 5,000 laid-off workers will include around 1,000 in Sweden, primarily in Stockholm. Many of those made redundant will be consultants and other temporary staff, although Ericsson has also said it will consolidate its research and development sites.

In the statement, Ericsson president and chief executive Carl-Henric Svanberg claimed his company had demonstrated "solid performance" in 2008.

"Sales grew by 11 percent with good demand for our entire portfolio and across the world," Svanberg said. "Changes in currency rates had a very small effect on full-year growth. Professional services have continued to show strong growth. Operating margins, excluding Sony Ericsson, have steadily improved, and our financial position is strong with net cash of SEK 35bn. Sony Ericsson is affected by the economic downturn and the declining demand in the consumer market and has taken necessary actions."

Svanberg said the recession's effects on the global mobile-network operator market — Ericsson's primary customer base — "should not be that significant" as operators are still doing well and traffic continues to grow.

"It remains, however, difficult to more precisely predict to what extent consumer telecom spending will be affected and how operators will act," Svanberg warned. "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."

Ericsson also said it would reduce its number of software platforms and "increase the re-use of hardware", and would also move some of its operations to "low-cost" countries.