By Amir Mizroch And Juhana Rossi
Telecom-equipment giant Ericsson AB said Wednesday it will shed
2,200 jobs, the latest move by Chief Executive Hans Vestberg to
transition the company from a hardware provider into a global
leader in mobile-network software.
For most of its 139-year history, Ericsson churned out consumer
products, from its first device--a table-top phone introduced in
1892--to its once-popular cellphones. But more nimble competitors,
including Apple Inc. and Samsung Electronics Co., outmaneuvered
Ericsson and its biggest rivals Nokia Corp. and Motorola Inc. The
new players pumped out more popular phones, chasing all three out
of the business.
Shortly after taking the reins in 2010, Mr. Vestberg, 49 years
old, ditched the company's last handset model. He focused Ericsson
full-time on building cellphone network equipment--the towers and
base stations that underpin the world's wireless voice and
data-transmission infrastructure--as well as the software that
manages those networks.
Ericsson is now the world's top network-equipment maker,
accounting for about a third of the industry's annual revenue,
according to consultancy Dell'Oro Group. It competes with No. 2
Huawei Technologies Co. of China and No. 3 Nokia, which sold its
handset business to Microsoft Inc.
In recent years, Ericsson rode a wave of growing revenue, as
major operators such as AT&T Inc. and Verizon Communications
Inc. upgraded their networks to new high-speed standards. At the
same time, Mr. Vestberg, who started at Ericsson in 1988, redoubled
efforts to diversify into selling and servicing the software that
run those networks.
Amid a downturn in network sales in the second half of last
year, however, he has also been slashing costs to boost
profitability. Ericsson promised in November to cut 9 billion
Swedish kronas ($1.1 billion) in costs by 2017.
The job cuts disclosed Wednesday will all be in Sweden,
Ericsson's home market. Ericsson said they are concentrated in
research and development and supply divisions. They represent a
small fraction of the company's roughly 118,000 world-wide staff,
but more than 13% of its Swedish workforce.
Swedish labor union IF Metall called Ericsson's move "a hard
blow" to employees. In a statement, Ericsson said the cuts are
aimed at cutting expenses to fund growth in other areas, including
its network and software businesses.
Ericsson's recent history has been strewn with jolting
transformations. Between 2001 and 2003, amid a global technology
pullback, Ericsson shed some 45,000 employees, almost half of its
workforce of 100,000 at the time. It cut $50 million in costs every
week for two years.
It had teamed up with Sony Corp. in 2001 to jointly make and
sell handsets, a booming business at the time. But just a few years
later, phone sales became increasingly dependent on consumer
tastes, especially in the large and lucrative U.S. market. The
iPhone debuted in 2007.
Five years later, Ericsson divested its 50% stake in the Sony
joint venture. The move made Mr. Vestberg the first CEO in the
company's history to abandon the consumer market completely. The
decision was "emotionally difficult, strategically very simple," he
said in an interview last week.
Wednesday's layoffs are part of Mr. Vestberg's more-recent
overhaul--repositioning Ericsson's business away from costly
hardware into software and services. In 2004, 73% of the company's
revenues came from hardware, and only 27% from software and
services. By 2014, that mix had been almost completely
reversed.
"And still, I'm quoted as the equipment manufacturer," Mr.
Vestberg said.
Write to Juhana Rossi at juhana.rossi@wsj.com
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