Apr 22, 2002 12:00 PM,

Ericsson earnings down; cuts 20,000

Toby Weber

Ericsson today announced earnings and revenues down significantly year-over-year, and said that it would reduce its headcount by an additional 20,000.

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For the quarter ending March 21, the company reported sales of approximately $3.6 billion, down 26% from the first quarter 2001. Net loss, according to Swedish generally accepted accounting principals (GAAP) was $35.7 million, or 3 cents per share. Under U.S. GAAP, net loss per share was 4 cents.

Going forward, Ericsson continues to see demand weaker than it had earlier anticipated. Mobile system sales, which earlier were expected to be flat to down 10% for the year, now are expected to be down more than 10%. The market for wireline systems is also expected to shrink in 2002, with circuit switching down about 40%. In addition, Ericsson also lower its expectations for global handset sales, which are now expected to fall between 400 million and 420 million units, in line the lowered guidance provided by Nokia last week.

“Only three months ago, there was a general anticipation that the systems market would improve during the second half of this year,” said Ericsson President and CEO Kurt Hellstrom. “We now believe that market conditions will remain weak well into next year.

As a result of these lowered expectations, Ericsson now says it post an operating loss the year and will not return to profitability until sometime in 2003, even with aggressive cost-cutting.

As large part of that expense reduction, the company said that it reduced headcount by 3000 in the first quarter and will cut a total of 20,000 jobs by the end of 2003. The move should bring the company’s payroll down to about 65,000 people.

The company is also consolidating two of its main divisions. According to Hellstrom, there is an emerging demand for integrated wireline and wireless solutions, the result of a desire for common service platforms and transport networks. In response, the company is merging its mobile systems unit with multi-service networks. The new structure will be in place by May 1.