Due to drop in profits, Ericsson to cut 5,000 jobs

Wireless equipment maker LM Ericsson on Wednesday said profits dropped 31 per cent in the fourth quarter, citing restructuring charges and weaker handset sales, and said it would slash 5,000 jobs.

Ericsson said net profit fell to 3.9 billion kronor ($465 million) from 5.6 billion a year earlier.

It reported ``a dramatic drop'' in the contribution from its handset unit, Sony Ericsson. The joint venture with Japan's Sony last week said it had swung to a fourth-quarter loss of euro187 million ($243 million).

For the full year 2008, it posted a profit of 11.3 billion kronor, nearly half the 21.8 billion kronor reported for 2007.

Boosted by a weakening krona, Ericsson's sales in the fourth quarter rose 23 per cent to 67 billion kronor, from 54.5 billion kronor a year earlier.

The share soared nearly 11 per cent to 62 kronor in Stockholm stock market opening.

The world's leading maker of mobile broadband infrastructure said it released the fourth-quarter results a week ahead of schedule because it believed they exceeded market expectations.

In a statement, Chief Executive Carl-Henric Svanberg described his company's performance in 2008 as ``solid,'' pointing out the sales and the operating margins, excluding Sony Ericsson. He warned however that the financial downturn makes it ``difficult to more precisely predict to what extent consumer telecom spending will be affected, and how operators will act.''

The company said it needs to widen its savings program as the global financial crisis continues to pressure the industry, tough competition and the technical development. That would mean cutting 5,000 jobs, or more than 6 per cent of its 79,000-strong work force, Ericsson said.

The Stockholm-based company said it expected restructuring charges of 6 billion-7 billion kronor, yielding annual savings of around 10 billion kronor by the second half of the year.

In a webcast news conference with analysts and journalists, Svanberg said ``we're doing this of course because of the uncertainty in the market.''

For 2009, he said it will be a priority for the company to stay close to its customers to understand their behavior and needs, adding his company is also preparing for tougher times to be able to defend its margins and extend its leadership.

Agencies