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Ericsson to cut more jobs
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April 20, 2001: 11:22 a.m. ET
World's No. 1 mobile network equipment maker warns of loss in second quarter
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LONDON (CNN) - Ericsson, the world's largest mobile phone network maker, said on Friday it expects a second-quarter loss and plans to slash up to 12,000 more jobs.
Ericsson also posted a pretax loss of 4.9 billion crowns ($488 million) for the first quarter ended March 31, excluding a gain of 5.5 billion crowns from the sale of its stake in Juniper Networks Inc. of the U.S.
Ericsson and rivals such as Motorola (MOT: Research, Estimates) are suffering the effects of the economic slowdown in the U.S. and a reduction in orders from debt-laden phone companies. At the same time, fewer people than expected are replacing their old mobile phones with new models.
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A general economic downturn and an abruptly slower telecom sector are affecting our customers as well as us.
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Kurt Hellstrom
Ericsson chief executive |
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The first quarter loss compares with Ericsson's 6.1 billion crown profit in the same quarter last year. Ericsson had earlier forecast it would lose 5 billion crowns in the first quarter.
Including the gain from Jupiter, income before taxes amounted to 606 million crowns, Ericsson said.
Shares in Ericsson were down more than 15 percent at 58.50 crowns in afternoon trade in Stockholm. Ericsson's (ERICY: Research, Estimates) U.S. shares dropped 16.5 percent to $5.91.
Ericsson said its previously announced restructuring programme could affect as many 10,000 employees, half of them outside of Sweden, plus 2,000 jobs in its mobile phone unit, bringing the total job cuts announced this year to 22,000, about a fifth of its workforce.
The company also said it saw a lower growth rate in network systems sales in the next three months and lower phone sales, compared with the first quarter 2000, and said second-quarter pretax income would not improve from the first quarter.
But Ericsson gave no full-year outlook, due to the "unknown duration and magnitude of the current market situation and its effects" on the company.
 Ericsson, which is the third-largest maker of mobile phones, said sales at its phones division plunged 52 percent in the first quarter to bring its operating loss to 5.7 billion crowns, An 8 percent rise in network orders limited some of the damage for the company.
"A general economic downturn and an abruptly slower telecom sector are affecting our customers as well as us," Kurt Hellstrom, Ericsson chief executive said in a statement. "Many operators are postponing their investments, which has resulted in an overall reduction of sales."
Ericsson's loss contrasted rival Nokia's 9.6 percent rise in pretax profit, which beat the Finnish firm's lowered expectations.
Ericsson said on Thursday it was in talks with Japanese electronics titan Sony for a possible tie-up in their mobile phone handset businesses.
The Swedish company said in January it would fully outsource its handset production, with the vast majority to be taken over by Singapore-based Flextronics International (FLEX: Research, Estimates). 
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