RealTime IT News

Ericsson Reports Loss, Restructures

Hurt by the slumping telecommunications market, Ericsson Monday reported a loss of $289 million and said that it would both cut roughly 20 percent of its workforce and try to raise almost $3 billion to cope with its situation.

The Swedish phone maker revealed a loss of about 4 cents per share, slightly less than what analysts had expected. Still, the hit was enough to make Ericsson pledge to purge up to 17,000 employees by 2003, with 7,000 to go this year. Up to an additional 10,000 may be let go next year. Ericsson's job cuts have been large and steady, as the company pink-slipped about 10,000 in 2001, and additionally 3,000 in the first quarter of 2002.

"As expected, this past quarter was very challenging," said Kurt Hellstrom, president and CEO of Ericsson. "Many operators have recently lowered investment plans further. As sales will be lower than anticipated, with ongoing aggressive cost cutting we plan to return to profit at some point in 2003."

That sales were lower is, perhaps, understatement. The company said that sales had fallen 25 percent to $3.6 billion and that orders were down 40 percent to $4 billion from one year ago. While Ericsson said its multi-service networks offerings suffered from slow sales, it saw some positives in its services business, which now represents 24 percent of all company sales. About half of this was systems integration, network operations outsourcing and advisory services.

Looking forward, Ericsson is banking on growing demand for integrated wireless and wireline solutions to achieve common service platforms and transport networks. The outfit said it planned to address this market opportunity by combining its Mobile Systems with Multi-Service Networks including ENGINE, which is software for upgrading circuit-switching networks to next generation packet-switching capability. It will constitute a new business unit.

"Our order intake demonstrates that the world's leading operators continue to choose our equipment to build-out and upgrade their networks," Hellstrom said. "At the same time, we are expanding our Services business by providing solutions that reduce our customers' operating expenses."

As for the rights offering to raise money, Ericsson's board of directors have called an Extraordinary General Meeting of shareholders for June 6 2002 to greenlight the plan. The rights offering is expected to be carried out before the end of the third quarter 2002.

Ericsson anticipates finishing the year with a loss, and hopes to get back on the path to profitability in 2003.