Ericsson sacks 12,000 after revenue slump

But Sony still likes it

By Kieren McCarthy, 20th April 2001

Magic Quadrant for Enterprise Backup/Recovery

Ericsson has announced it will lay-off 12,000 staff in a bid top return to profitability after it announced disastrous results today.

The mobile manufacturer saw its shares fall 13 per cent when it announced a Q1 loss of SKr4.9 billion (Swedish krona = £338 million). This was actually just slightly better than expectations of a SKr5 billion loss, but the company also said it doubted whether things would improve in the second quarter.

It is also a far cry from the SKr6.1 billion (£421 million) profit it made this quarter last year.

It's all down to heavy losses in the company's handset business and a heavy slowdown in the infrastructure market. Operating margins have fallen from 11 per cent to minus 8 per cent. The company said it wasn't likely to reach its 10 per cent margin level this year.

And so, with depressing regularity, we see another slew of jobs go in the IT market. The 12,000 announced today (half from Sweden, half from outside) will see its number of consultants halved. And this is on top of the 3,300 it already announced from its manufacturing plants.

It's not all bad news though: Ericsson plans to merge its handset operations with Sony. Ericsson president and chief exec Kurt Hellstroem has refused to comment at the moment, but it's a virtual certainty that the two will link up to develop and sell mobiles - a good move for both of them.

Such an alliance would put them just behind Motorola in terms of market share (although both are eclipsed by Nokia). It would let Sony's entertainment technology into the market on Sony's terms and give Ericsson a helping hand while possibly giving its phones an edge.

Sony has already developed mobiles that use memory cards for storing music and is working with Sun's Java to produce next generation games on a phone. ®