Telecom network vendor Ericsson will eliminate 2,200 jobs in Sweden, its head quarter.
Resources in research and development (R&D) and supply will be impacted, Reuters reported on Wednesday.
Interestingly, Ericsson’s main competitors such as Huawei, Alcatel-Lucent, Nokia Networks and ZTE are yet to announce any job cut this year. Recently, media reported that IBM may slash 100,000 jobs across the globe. This was denied by the IT giant.
Ericsson, which is struggling to improve profit and revenue growth, today said the job cut is part of its latest cost-cutting program. In November 2014, Ericsson said it aimed to cut annual costs by $1.05 billion, with full effect in 2017. The program will entail restructuring charges of around 3-4 billion crowns between 2015 and 2017.
Why job cut
Michael Soper, telecom analyst at TBR, said that Ericsson will restructure its business to reduce operating expenses and cost of sales expense by 2017.
Industry experts say Ericsson’s restructuring will not be on the scale of Nokia Networks or Alcatel-Lucent. Ericsson aims at improving margins that lag Nokia Networks and Huawei.
The good news is that Ericsson does not have the huge headcount as compared with Nokia Networks and Alcatel-Lucent during their pre-structuring stage. This apart, it has not done any wrong steps in M&As. Ericsson aims to reallocate legacy R&D and S&M spend to its Industry & Society, cloud, and SDN/NFV businesses.
Earlier, the company decided to wind down the modems business unit and reallocate some of its R&D resources to the Radio unit. Ericsson expects to incur between $404 million and $539 million in restructuring costs during this three-year period.
Will R&D take a hit
Ericsson Chief Financial Officer Jan Frykhammar said past increases in R&D spending had partly aimed at reducing the number of hardware platforms and versions of software, while Ericsson had also worked on structurally improving R&D efficiency.
Ericsson spent 36.3 billion Swedish crowns ($4.2 billion) on R&D in 2014, or 15.9 percent of its revenue against 32.2 billion the previous year.
The number of employees at Ericsson in 2014 was 118,000, including 17,580 in Sweden and around 25,700 in R&D globally. With nearly 20,000 employees, India had more Ericsson employees than Sweden.
Baburajan K
editor@telecomlead.com
