Ericsson profit plunges 92 pct as mobile operators cut spending on networks; 1,500 jobs to go

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Ericsson to cut 1,500 more jobs as profit plunges

STOCKHOLM — Wireless equipment maker LM Ericsson AB on Monday said it will cut another 1,500 jobs this year after reporting a 92 percent drop in fourth-quarter profit as mobile operators slashed spending.

Ericsson said net profit in the October-December period was 314 million kronor ($43.4 million), down from 3.9 billion kronor in the same three months 2008, while full year profits dropped 67 percent to 3.7 billion kronor ($512 million).

Quarterly sales fell by 13 percent to 58.3 billion kronor ($8.1 billion), from 67 billion a year earlier. Sales for 2009 fell by 1 percent to 206.5 billion kronor ($28.6) from 208.9 billion kronor.

The company, based in Stockholm, raised the target for its savings program to 15-16 billion kronor ($2.1-2.2 billion) in annual savings from 10 billion kronor before. It said the expansion of the savings program will increase total layoffs to 6,500 from the 5,000 previously planned.

The scheme, which was launched a year ago, is expected to be completed in the second quarter of 2010 at a cost of 13-14 billion kronor ($1.8-1.9 billion).

Network sales were hit by reduced operator spending in several markets, but Ericsson managed to maintain market share, the company’s new CEO, Hans Vestberg, said in a statement.

Vestberg said the downturn in investments coincided with an anticipated decline in sales related to the GSM cellular standard, as telecommunication operators shifted their focus from voice telephony to mobile broadband.

Vestberg replaced Carl-Henric Svanberg as Ericsson’s president and CEO on Jan. 1 as Svanberg took over as chairman of oil major BP Group PLC.

Greger Johansson, an analyst at research firm Redeye, said the result was largely in line with expectations, although in the lower end of forecasts.

“Professional services were weaker than expected and network sales somewhat worse than forecast,” he said.

However, he added the expansion of the savings program was positive news.

Shares in Ericsson fell by 3.2 percent to 69.6 kronor ($9.63) in early trading on the Stockholm stock exchange.

Ericsson’s handset arm Sony Ericsson — a joint venture with Japan’s Sony Corp. — last week said its losses narrowed to €167 million ($235 million) in the fourth quarter, from €187 million in the same period 2008.

Ericsson proposed to raise the dividend to shareholders to 2 kronor per share from 1.85 kronor last year.

With more than 80,000 employees worldwide, Ericsson is one of Sweden’s biggest companies and has long been a key global supplier of fixed and mobile phone networks. It is increasingly focusing on providing services, like managing the networks of operators.

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On the Net: www.ericsson.com