Ericsson announced on Jan. 25 an extra 1,500 job cuts under restructuring which bit deeply into fourth-quarter net profit at the firm, the world leader in phone network equipment said.
Total announced job cuts are now about 6,500, generating huge restructuring charges with the intention of bringing equally huge cost savings.
The Swedish telecom giant, which has some 83,000 employees worldwide, said sales had dropped in the fourth quarter owing to cuts in investments by mobile phone operators in a number of markets, including in developing nations in central Europe, the Middle East and Africa.
In a sign of the impact of the economic crisis on the telecom industry, Ericsson's net profit plunged by 92% to 314 million kronor (US$ 43.4 million) between October and December. That was in contrast to a net profit of 3.89 billion kronor in the same period of 2008.
Restructuring costs nearly doubled to 4.3 billion kronor in the fourth quarter, compared to 2.3 billion kronor in the same period in 2008, and for the full year the charges totalled 11.3 billion kronor, the company said.
The company estimated that its restructuring program would cost up to 14 billion kronor and bring annual savings of between 15 billion and 16 billion kronor.
Ericsson has also suffered from the difficulties at its two joint ventures, Sony Ericsson and ST-Ericsson, which together chalked up charges of 1.46 billion kronor.
Sales fell by 13% to 58.3 billion kronor in the fourth quarter in the wake of the global economic crisis and growing competition from telecom equipment industry with the rise of China's Huawei.
Ericsson said the anticipated decline in sales of older GSM networks had accelerated owing to the economic crisis, but was not yet offset by the growth in mobile broadband and investments in next-generation IP networks. "During the second half of 2009, Networks' sales were impacted by reduced operator spending in a number of markets," Ericsson chief executive Hans Vestberg said.
"During 2009, operators in a number of developing markets, especially Central Europe, Middle East and Africa, became increasingly cautious with investments. Meanwhile, other markets including China, India and the U.S. continued to show good development with major network buildouts," Vestberg said.
Copyright Agence France-Presse, 2010