Wireless equipment maker LM Ericsson AB said yesterday its fourth-quarter profits dropped 92 percent as mobile operators slashed spending on upgrading and expanding their networks.
The company also said it would cut an additional 1,500 jobs under a restructuring plan that also contributed to the sharp plunge in profits.
Ericsson said net profit in the fourth quarter was 314 million kronor (US$43.4 million), down from 3.9 billion kronor the previous year.
Sales fell 13 percent to 58.3 billion kronor, from 67 billion a year earlier.
Network sales were hit by reduced operator spending in several markets, but Ericsson managed to maintain market share, the company’s new CEO, Hans Vestberg, said in a statement.
Vestberg said the downturn in investments coincided with an anticipated decline in sales related to the GSM cellular standard, as telecommunication operators shifted their focus from voice telephony to mobile broadband.
Vestberg replaced Carl-Henric Svanberg as Ericsson’s president and CEO on Jan. 1 as Svanberg took over as chairman of oil major BP Group PLC.
Restructuring costs reached 4.3 billion kronor in the fourth quarter, compared with 2.3 billion kronor in the same period in 2008, the company said, adding that for the full year, total charges reached 11.3 billion kronor.
“When the initial [restructuring] program 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.
Ericsson’s handset arm Sony Ericsson — a joint venture with Japan’s Sony Corp — last week said its losses narrowed to 167 million euros (US$236 million) in the fourth quarter, from 187 million euros in the same period a year earlier.
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