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Ericsson sheds jobs as profits fall

04 февраля 2008

Ericsson plans to cut as many as 4,000 jobs this year because it does not expect the wireless telecoms infrastructure market to grow significantly in 2008.

Ericsson sheds jobs as profits fallThe world’s largest maker of networks for mobile phones gave a sombre outlook for 2008 as it published fourth-quarter results for 2007 that showed net income fell more than 40 per cent. The shares closed down 3.5 per cent at SKr13.80.

Carl-Henric Svanberg, chief executive, said the company was in a better position than several competitors, some of which were reporting losses.

Ericsson stunned investors in October by issuing a profit warning because of a shortfall in orders for expansions or upgrades to networks. It had been relying on these higher-margin orders to offset lower-margin contracts to roll out new networks.

Ericsson’s market value has fallen by 48 per cent to SKr223bn ($35bn) since the October 16 profit warning.

“We have obviously disappointed the market on margins but overall we have done quite well,” Mr Svanberg said.

Ericsson reported sales of SKr54.5bn for the three months to December 31, which was flat on the fourth quarter of 2006.

The operating margin in the fourth quarter of 2007 was 14 per cent compared with 22.5 per cent in the same period in 2006. Net income was SKr5.6bn, down 42 per cent.

Full-year sales were SKr187.8bn, up 4 per cent, and net income was SKr21.8bn, down 17 per cent. The proposed 2007 dividend, at SKr0.5 per share, is unchanged on 2006.

Mr Svanberg reiterated Ericsson’s view that the problem of a shortfall in higher-margin orders for network upgrades may last into Ericsson’s first half of 2008, and he declined to offer a second-half prediction.

But he said industry fundamentals remained robust, highlighting how 50m mobile phone subscriptions were taken out each month on a global basis.

Richard Windsor, an analyst at Nomura, warned there was no sign of orders from western mobile operators for network upgrades that would boost Ericsson’s operating margin.

Ericsson is looking for SKr4bn of annual savings by cutting up to 4,000 jobs from its 74,000-strong workforce, including
1,000 in Sweden.

Mr Svanberg said he hoped these savings would be retained by Ericsson rather than passed on to customers in the form of cut- price contracts.

But he admitted that competition for orders with western rivals such as Alcatel-Lucent, plus Chinese alternatives such as Huawei, remained intense.

Источник: Financial Times

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