More job cuts on horizon for Ericsson - Mobile World Live

More job cuts on horizon for Ericsson

19 JUL 2016

Ericsson CFO Jan Frykhammar forecast further job cuts in an interview with Mobile World Live, as the vendor’s second quarter results saw a disappointing 11 per cent fall in net sales and a 26 per cent plunge in net income.

“Will there be more job losses? This is the only way unfortunately to reduce cost so there will be reductions in our workforce and consultants,” said Frykhammar.

There will “probably” be job cuts in the third quarter under existing efficiency plans, he said.

About 4,000 staff left the company in the second quarter, although the reduction was offset by the addition of new staff following the acquisition of Polish software firm Ericpol, he said. Last year, 13,000 left the company and about 10,000 joined.

Frykhammar declined to put a figure on job losses for the rest of the year but said the number will be “significant”, although he added there was also the possibility of staff additions.

In its Q2 2016 results, the company doubled the target of its previously announced opex reduction programme. The current plan is savings of SEK9 billion ($1 billion) during 2017.

In addition, Ericsson will reduce R&D investment in IP as well as reap savings from its new corporate structure, announced in April.

These moves are expected to cut opex, excluding restructuring charges, to SEK53 billion in the second half of 2017, compared to SEK63 billion for full-year 2014. This equates to twice the previously announced savings.

Challenging quarter”
“My view is it is a challenging quarter,” summarised Frykhammar, referring to the top line decline, which was attributed in particular to a weak performance from the mobile broadband unit. Brazil, Russia and the Middle East were highlighted for macroeconomic factors. In Europe, the completion of projects last year continued to have a negative impact on year-on-year sales growth.

Overall, net sales fell by 11 per cent to SEK54 billion in the second quarter, while net income dropped by 26 per cent to SEK1.6 billion.

The downbeat tone continued with the company’s outlook. The trends seen in this quarter will be continued throughout the rest of this year, it said.

Change at the top?
Amidst talk of investor dissatisfaction, there has been speculation that the position of CEO Hans Vestberg could be under threat. Frykhammar put on a brave face: “From my point of view, Hans and I work together day and night to make sure this company performs the best it can under the given circumstances. I will not comment or speculate on anything else.”

Cisco partnership
Meanwhile the vendor talked up its progress with the Cisco partnership, stating that more than 30 deals have been closed so far, “forming a good start to reach the targeted sales of $1 billion for 2018.”

Ericsson said it has “engaged more than 200 customer opportunities, spanning all major geographies.”

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Richard Handford

Richard is the editor of Mobile World Live’s money channel and a contributor to the daily news service. He is an experienced technology and business journalist who previously worked as a freelancer for many publications over the last decade including...

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