Ericsson profit declines, plans to cut 5,000 jobs

IDG News Service - Swedish telecom equipment vendor Ericsson saw declining profits for its fourth quarter and will lay off 5,000 employees in a continuing effort to cut costs, the company said today.

The company plans to achieve annual savings of 10 billion Swedish kronor ($1.2 billion U.S.) from the second half of next year through the job cuts.

Around 1,000 people will be laid off in the Stockholm area. Ericsson will also reduce the number of consultants and other temporary staff, it said in a statement.

Ericsson must be prepared for tougher times and do everything it can to defend its current market position, said CEO Carl-Henric Svanberg. Ericsson said it's difficult to predict to what extent consumer spending on telecom services will be affected in the future.

Ericsson said its core infrastructure business has hardly been hit by the recession so far, but the company did see declining profits. Sales for 2008, however, were up compared to the previous year.

The company made a net profit of $466 million during the fourth quarter, compared to $669 million during the same period in 2007. Full-year profits came in at $1.3 billion, down from a net profit of $2.6 billion in 2007.

At the same time, sales during the fourth quarter increased by 23% to $8 billion compared to a year earlier. Sales for 2008 came to $25 billion, 11% higher than 2007.