Ericsson announced plans this morning to make an unspecified number of job cuts as part of an aim to reduce costs by SEK9 billion ($1.2 billion) between now and 2017.
The news came out during the Swedish vendor’s annual Capital Markets Day.
The company will incur an additional SEK3-4 billion charge in restructuring costs on top of the SEK2 billion a year in costs management Ericsson had previously planned for until 2017.
In a statement, the firm noted: “It is estimated that half of the savings will reduce Ericsson’s operating expenses (opex) and the other half will impact cost of sales.”
It continued: “Accelerated efficiency measures will primarily relate to five key areas: portfolio streamlining and ways of working in R&D; structural enhancements in IS/IT; accelerated Service Delivery transformation; supply chain efficiencies; as well as structural efficiency gains in G&A. Savings will include both headcount reductions as well as savings in external costs.”
An Ericsson spokesperson was unable to provide further comment on the cuts. The company had approximately 117,000 employees at the end of September.
“The key components of our profit improvement plan is to strengthen core business, build strength in targeted areas while at the same time continue to improve our cash flow,” commented Jan Frykhammar, chief financial officer. “Although we believe opex will peak in 2014, we believe we can do more to increase efficiency and reduce cost.”
Meanwhile CEO Hans Vestberg (pictured) used the event to reiterate comments made last week about moving into new growth areas. “We are taking the next step in our transformation to become a leading ICT player,” he stated. “The telecom, IT and media industries are converging and we are confident in our choice of strategy to play a key role in this new world. We will continue to build on our combined strength of technology and services leadership to stay relevant to our customers in a transforming industry.”
The company aims to “excel” in its core business of radio, core and transmission, and telecom services. And it aims to “establish leadership” in certain targeted areas: Cloud, IP networks, TV and media, OSS and BSS, “as well as in Industry & Society, addressing new customer segments outside of the telecom operator domain.”
Under pressure from rivals Huawei, Nokia and Alcatel-Lucent, Ericsson is confident it can grow faster than the overall market between now and 2017.
“The ambition going forward is to continue to grow faster than the projected total addressable market CAGR of 3-5 per cent 2013-2017,” added the statement. “Ericsson’s growth will be supported by a CAGR of approximately 10 per cent in 2013-2017 in the targeted areas.”