Ericsson chief wins over investors with cost-cutting programme

ERICSSON chief executive Carl-Henric Svanberg is winning over investors and analysts after accelerating cost cuts at the world’s biggest maker of wireless-network equipment during his first four months on the job.

At least nine analysts have upgraded Ericsson's stock since April 29, when Mr Svanberg announced plans to cut 13,000 jobs on top of 46,000 already achieved, trimming the Stockholm-based company's workforce to 1968 levels.

Two have downgraded it, Bloomberg data shows. Ericsson shares have gained 46% since Mr Svanberg joined, more than rivals Nokia, Alcatel and Motorola Inc.

The 51-year-old, who took over on April 8 when the stock had slumped 96% since March 2000, is fighting a third year of falling demand for networks that transfer mobile phone calls. Ericsson will today say job cuts helped reduce its second-quarter loss, excluding reorganisation costs by 38% even as sales plunged, analysts estimate.

"I'm very positively surprised by what he's done so far," said Bruno Lippens of Robeco Groep in Rotterdam . "He seems to be planning to change this company pretty rapidly."

Ericsson's second-quarter pre-tax loss before reorganisation costs and one-time items probably shrank to 1.9 billion kroner (€220 million) from 3.08 billion kroner (€368m), the SME Direkt survey of 28 analysts showed. Sales fell 29% to 27.4 billion kroner (€3.2bn), according to the survey.

Nokia, Ericsson's closest rival in wireless equipment, yesterday said sales at its network division will drop as much as 20% this quarter as it sees "no signs' of a market rebound.

To sustain the recent stock gains, Mr Svanberg must prove Ericsson can reduce expenses enough to be profitable even if sales keep falling, investors said. Mr Svanberg last month said 2004 may be "slow' for the company, though stuck to a goal of returning to profit this year.

The stock remains far below its peak Ericsson's market value has dropped by more than 180bn since March 2000.