Ericsson (ERIC) Plans Massive Layoffs To Streamline Costs
Zacks Investment Research | Aug 18, 2017 08:57AM ET
According to an article in Svenska Dagblade, Ericsson (BS:ERICAs) (NASDAQ:ERIC) is planning to cut 25,000 jobs outside Sweden in a desperate bid to contain costs and take its restructuring efforts to the next level. Although CEO Börje Ekholm announced impending job cuts earlier this month, the sheer magnitude has left industry insiders stunned.
Last month, the beleaguered infrastructure giant announced that it plans to double its 2016 underlying operating margin of 6% by ramping up its cost-reduction drive. To meet this end, Ericsson announced to implement cost savings with an annual run rate effect of at least SEK 10 billion ($1.2 billion) by mid-2018.
Job Cuts in Store
Over the past year, the company has sacked 7000 jobs in North America. The company is striving hard to slash common and service delivery costs, while keeping research and development costs unaltered. Details of the latest planned layoffs has been kept under wraps, as Ericsson did not comment which departments or countries will bear most of the brunt.
People familiar with the matter expect that the troubled media business, which is under review, and Managed Services division may be the worst affected. If sources are to be believed, Ericsson has plans to streamline operations by a whopping 80-90% in some markets and centralize operations in others.
Headwinds Galore
The premium networking, telecommunications equipment and services provider’s financial troubles over the past few years have been well documented. Ericsson’s repeated earnings misses, eroding profitability and precipitous revenue decline have left investors high and dry. Also, shrinking gross margins have been putting immense pressure on the bottom line. The stock has lost 9% in the past three months, wider than the Zacks Investment Research
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