Job cuts from Ericsson to counter flat market

February 2, 2016

Ericsson is cutting 1,000 jobs in Sweden, where it employs 19,800 of its total 74,000 staff. There are plans to reduce headcount elsewhere, rumoured to be as many as 4,000 globally.

All parts of the business will be affected, though the main areas of focus will be sales, administration, sourcing, supply, and service delivery. Research and development will be affected the least.

The company predicts that the mobile infrastructure market, which generates two thirds of its revenues, will be flat in 2016. The cuts are expected to make savings of $628m annually, starting next year.

Analysts predict that consistent pricing pressure means that a flattish outlook is not enough to keep margins up, which is why Ericsson has announced the cost cuts in order to retain its competitive position. Competition from Asia, in particular, is growing in strength.

Multimedia, which includes Ericsson’s software (billing), IPTV and IP Multimedia Subsystem (IMS) units, is the one division that is losing money. An operating loss has been recorded in the fourth quarter. The main drain is in telco TV and video. Ericsson’s biggest investment is IPTV.