Ericsson to Lay off 25,000 Workers in Response to Cost Cuts

The Sweden-based multinational networking, and telecommunications equipment and services company, Ericsson, may slash around 25,000 jobs outside Sweden as it reported another disappointing quarter last month.

Ericsson carries 40% of the world’s mobile traffic on its networks, and is Sweden’s second largest company by revenue.

In July, the mobile telecom equipment maker said it would increase measures to meet a target of doubling its 2016 underlying operating margin of 6%.  Its new CEO Borje Ekholm announced an annual cost cuts of 10 billion crowns, or $1.2 billion.

The company has said that actions will be taken mainly in service delivery and common costs.

According to a report, there are advanced plans that Ericsson’s operations will be cut by 80-90 percent in some markets, and centralize several markets in Europe. However, the 14,000 employee-strong Swedish workforce is to stay unaffected, at least all R&D engineers.

“Right now, Ericsson is hiring engineers to repair the damage that earlier saving packages caused. It’s crucial that most of all the Swedish R&D departments remain somewhat protected. They are the  ones who will come up with the new solutions that will drive sales in the long term,” according to a person with knowledge of the matter.

According to news released in Sweden, it was not sure whether employees within the company’s media operations, which are focusing for strategic review, will be included in the planned job cuts.

Another source of the matter said that the company have calculated reversely the amount that they need to save, in order to get away from the crisis, while not risking any rights issue. “It will be brutal in some parts of the organization,” the source added.

“Ericsson has not communicated which specific units or countries could be affected. It is too early to talk about specific measures or exclude any country,” Ericsson said in a statement on its website.

Although the telecom company had reported a disappointing quarter, the second quarter losses of 1.17 billion crowns, or $150 million, caught the market by surprise. The market decline from second quarter 2016 profits of 2.2 billion crowns, or $150 million, saw the company’s A-class stock decreased 15% on the same day.

Currently, the company is vying with China’s Huawei and Finland’s Nokia, as well as weak developing markets and falling spending by telecoms operators with demand for next generation 5G technology, which is still years away. It presently employs 109,000 workers across 110 offices around the globe.

In the past one year, Ericsson has cut 7,000 jobs, most of them in North America, according to a leading newspaper in Sweden. The company’s biggest markets are Europe, and Latin America.

Meanwhile, Ericsson has traded 0.07, or 0.14%, to 49.63 SEK. It opened at 49.58 SEK, with a session high of 49.87 SEK, and a session low of 49.43 SEK. Its market capitalization was 171.45 billion, and its dividend yield was 2.02%.

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