Total announced job cuts are now about 6,500, generating huge restructuring charges with the intention of bringing equally huge cost savings.
But Ericsson chief executive Hans Vestberg refused to issue a forecast for 2010 earnings, telling reporters it was “too early” to say how the market would develop, financial daily Dagens Industri said in its online edition.
The Swedish telecom giant, which has some 83,000 employees worldwide, said sales had dropped in the fourth quarter owing to cuts in investments by mobile phone operators in a number of markets, including in developing nations in central Europe, the Middle East and Africa.
In a sign of the impact of the economic crisis on the telecom industry, Ericsson’s net profit plunged by 92 percent to 314 million kronor (30.7 million euros, 43.4 million dollars) between October and December.
That was in contrast to a net profit of 3.89 billion kronor in the same period of 2008, the company said in a statement.
The profit was much lower than expected as analysts polled by Dow Jones Newswires had forecast a net profit of 3.23 billion kronor.
Restructuring costs nearly doubled to 4.3 billion kronor in the fourth quarter, compared to 2.3 billion kronor in the same period in 2008, and for the full year the charges totalled 11.3 billion kronor, the company said.
The company estimated that its restructuring programme would cost up to 14 billion kronor and bring annual savings of between 15 billion and 16 billion kronor.
“When the initial (restructuring) programme was announced in January 2009, it was anticipated that the actions would result in a reduction of the number of employees by some 5,000, of which about 1,000 in Sweden, Ericsson said.
“The 5,000 has been exceeded and is estimated to reach approximately 6,500,” the company said in the statement.
Analyst Jan Dworsky at Handelsbanken said the cuts were necessary amid rising competition from Chinese rival Huawei.
“It has to be done to fight off the competition coming primarily from the Chinese suppliers. It’s necessary to do what they’re doing,” he said.
Ericsson has also suffered from the difficulties at its two joint ventures, Sony Ericsson and ST-Ericsson, which together chalked up charges of 1.46 billion kronor.
Sales fell by 13 percent to 58.3 billion kronor in the fourth quarter in the wake of the global economic crisis and the rising competition.
Ericsson said the anticipated decline in sales of older GSM networks had accelerated owing to the economic crisis, but was not yet offset by the growth in mobile broadband and investments in next-generation IP networks.
“During the second half of 2009, Networks’ sales were impacted by reduced operator spending in a number of markets,” Vestberg said in a statement.
“During 2009, operators in a number of developing markets, especially Central Europe, Middle East and Africa, became increasingly cautious with investments, he said.
“Meanwhile, other markets including China, India and the US continued to show good development with major network buildouts,” Vestberg said.