Ericsson, the Swedish telecomms group, is to cut up to 10,000 jobs at its Infocom Systems unit in a bid to boost profits.
The move comes despite rising profits and an expanding workforce across the group as a whole, but an Infocom official said the cuts were necessary "to increase profitability and strengthen our position as one of the leading suppliers of multimedia solutions." The company believes the cuts will save it SKr2 billion ($265 million) within two years.
The Infocom division concentrates on public switching and fixed networks and currently employs 38,000 people in 10 countries, in and outside Europe. In the past two years Ericsson has axed 10,0000 jobs from the division, in an ongoing restructuring programme designed to improve profits.
Other steps being considered as part of this initiative include further outsourcing of component manufacturing and a review of the research and development budget.
Ericsson's profits rose from SKr6.26 billion ($802 million) to SKr10.33 billion ($1.3 billion) in the first nine months of this year, with Infocom contributing one-third of all sales. But its profit levels - which are not broken out - are "unsatisfactory", according to Ericsson management.
The shake-up comes as no surprise to industry watchers who believe downsizing and outsourcing are now common practice in the pressurised telecomms sector. "There are not many companies of Ericsson's size in the market," said Chris Lewis, an IT analyst at Yankee Group. "BT's profits are going up but they're still cutting back or streamlining. I see a situation where other big players do the same, like Siemens in Germany and Alcatel Alsthom in France."
But a spokersperson for Siemens Communication Group denied recent rumours that it, too, will be forced to cut back on its workforce. "We won't be cutting any jobs for the next six to 12 months. Ericsson is one of our main competitors but we don't see any need for cuts in the mobile market because it's expanding so fast."
The company said the job cuts are scheduled for next year and will target workeres in manufacturing and administration, falling mainly outside Sweden. It claimed many of those affected will be rehired by other units or business partners - such as outsourcing suppliers.
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