Swedish telecom infrastructure group Ericsson, hit hard by a slowdown in the telecom sector, today announced a 17% fall in 2007 net profit and the shedding of 1,000 jobs in Sweden.
'The market growth slowed during last year and for 2008 we find it prudent to plan for a flattish mobile infrastructure market. We will reduce our cost base to safeguard our competitive position,' CEO Carl-Henric Svanberg said.
Net profit for the full-year fell to 21.8 billion kronor (€2.3 billion) although sales increased by 4% to 188 billion kronor.
Ericsson said it would cut 4 billion kronor from its annual cost base, leading to 1,000 job cuts in Sweden. 'These reductions will have full effect in 2009. All parts of the business will be affected,' the company said.
Svanberg did not exclude the possibility of job cuts in other countries as well. Ericsson has 74,000 employees worlwide, of whom 19,800 are in Sweden.
While all business areas would be affected by the cuts, he said the group would spare the research and development unit as much as possible.
For the fourth quarter of 2007, the company posted a 42% drop in net profit to 5.6 billion kronor from 9.7 billion a year earlier. Sales during the period remained stable at 54.5 billion kronor, compared to 54.2 billion during the fourth quarter of 2006. Operating profit fell by 38% to 7.6 billion kronor, while the operating margin shrank from 22.5% a year earlier to 14% - below analysts' expectations.
Ericsson shocked markets in mid-October when it announced that its earnings would be sharply weaker than expected in the third quarter due to a slowing market that was seen continuing through 2008.
It said investments in mobile network expansions and upgrades, which bring in more money than new rollouts, were slowing down and there was also rising competition from Asia.
Although Ericsson remains a solid industrial company and a world leader in its field, shareholders have gone cool on its stock, sending the price into freefall after the October 16 profit warning.
The Swedish company is not alone with its woes. French-US telecom group Alcatel-Lucent has already announced 4,000 job cuts, while German-Finnish Nokia Siemens Networks, plans to reduce its staff by around 15%.
