Ericsson share price rises on rumours of radical cost-cutting

Shares in Ericsson opened sharply higher on the Stockholm stock exchange on rumours that it will present a radical new cost-cutting programme for its handsets division.

In early trading, Ericsson shares were up by 4.39% or 2.50 krona (that's 17p) at 59.50 krona (equivalent to £4.09).

One broker, who declines to be named, says the mobile phone maker will have to cut its costs quite radically.

"This may involve firing consultants to lower costs. I expect they will present something in a couple of weeks."

The broker adds: "Ericsson may also have been oversold last week."

Ericsson's chief executive Kurt Hellstroem has told FinansTidningen that the company needs more expertise, and needs to rid itself of weaknesses before it can sell or find a partner for its ailing handsets division.

Hellstroem said: "If we have problems, then we cannot hope that someone will pop up and free us from them. First we have to get rid of the weaknesses in that division and that takes time."

He talked about the design problems in the handsets business and said it could take six months to find a new design chief.

Hellstroem said it could then be a further six months before that person takes up the position, and even longer before the new products come out.

He added that there was no need for drastic restructuring in the business, but he would reinforce cost-cutting measures.