Ericsson job cuts ‘a knife in the heart’ of Sweden

Ericsson is cutting about a fifth of its Swedish workforce and hundreds of consultants as demand for its network equipment falls and competition from China’s Huawei and Finland’s Nokia grows.
Ericsson job cuts ‘a knife in the heart’ of Sweden

The 3,900 job cuts remove most of Ericsson’s remaining manufacturing presence at home, where it had 5% of global production, and come before it has found a new CEO to replace Hans Vestberg, who was pushed out in late July as major investors revolted over the Swedish firm’s performance.

Failure to offset waning demand for telecom equipment has caused Ericsson shares to lose a quarter of their value this year and politicians and unions had scrambled in recent weeks to save jobs at the company, which was founded in 1876 as a maker of telegraph equipment and is one of Sweden’s biggest employers with a global staff of 116,500.

“It is a knife in the heart,” Swedish enterprise minister Mikael Damberg said yesterday. Ericsson still has the backing of prominent Swedish investors, the Wallenberg family-backed Investor and Industrivarden, but is under growing pressure for being too slow to take full advantage of the global explosion in data traffic, enterprise networking and cloud computing.

Last year, the company joined forces with Cisco Systems to fill a gap in its product line and sell combined network solutions to bolster sales.

However, the partnership has yet to announce any major sales breakthrough and some investors have expressed concern on whether the collaboration will deliver.

Ericsson’s deputy head of strategy Mikael Back said new product innovation was a bit slower than anticipated although the partnership was going largely according to plan. The Cisco tie-up is a test of Ericsson management’s claim that it does not need a big merger to match Nokia’s acquisition of Alcatel-Lucent.

In its quarterly report in July, Ericsson said that through its partnership with Cisco more than 30 deals had been closed to date. However, some worry about the lack of real sales figures to prove the partnership is working.

“There isn’t a silver bullet which can solve everything,” Mr Back said when asked about big M&A, adding that organic growth remained at Ericsson’s core.

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