Ericsson expects bad 2nd quarter, lays off 10,000

`Marked downturn' in market is blamed

April 21, 2001|By BLOOMBERG NEWS

STOCKHOLM, Sweden - LM Ericsson, the largest supplier of wireless networks, announced yesterday that it will eliminate as many as another 10,000 jobs and may lose more money in the second quarter than in the first because of slowing demand.

The Swedish company forecast a pretax loss of at least 4.9 billion kronor ($485 million) this quarter. The cuts bring reductions this year to 14,000, or 13 percent of Ericsson's staff. The company posted a first-quarter loss from operations - the first in nine years.

Ericsson is firing staff, farming out phone production and seeking alliances with rivals such as Sony Corp. to cut expenses. The company, which aims to slash costs by 38 billion kronor from 2002, and competitors such as Motorola Inc. are suffering as debt-strapped operators reduce network orders and handset sales slow.

"It's clear that there's a marked downturn in the market," Chief Executive Officer Kurt Hellstroem said in an interview. "It spread from the U.S. to Europe and will probably spread to Asia."

Ericsson shares fell 10 kronor, or 14 percent, to 59, having risen 20 percent in the past two days. Before yesterday, they had dropped 36 percent since the beginning of the year.

The third-largest maker of mobile phones has struggled with its handsets in the past 2 1/2 years as it lagged behind bigger rival Nokia Oyj in introducing models that appeal to consumers. Now, Ericsson also may start losing orders for wireless networks, its biggest and most profitable business, investors and analysts said.

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