STOCKHOLM, Sweden (AP) — Wireless equipment maker LM Ericsson AB reported a sharp drop in fourth-quarter net profits and said Friday it would lay off around 1,000 employees in Sweden because of costs cuts.
At a news conference later Friday, Ericsson's CEO Carl-Henric Svanberg said job cuts would also be planned worldwide to reach its annual cost cut goal of 4 billion kronor (euro424 million; US$629 million).
'Totally in the world... As a rule of thumb, I'm sure that a thousand (people) per billion (kronor) is probably in the neighborhood of where it's going to end up,'' Svanberg said, adding that such a head count would include consultants, suppliers and temporary workers. The company later declined to clarify his comments further.
All parts of Ericsson's business would be affected by the savings, Svanberg said.
''What we're doing is to adjust to a slower market,'' Svanberg said. ''We're taking action to safeguard our competitive position.''
One-time costs are expected to reach around 4 billion kronor (euro424 million; US$629 million), but will be taken ''as each activity is decided.''
The full effect of the cost cutting is expected in 2009, the company said, and most of the layoffs in Sweden would be made through voluntary programs ''as far as possible.''
''Sometimes voluntary doesn't work,'' Svanberg said, ''but that's how we want to approach it.''
The company also said that although industry fundamentals and consumer behavior back a positive longer-term outlook, ''we find it prudent to plan for a flattish mobile infrastructure market'' in 2008 on the back of slowing market growth in the past year.
Operating margin for the quarter fell to 14 percent, from a previous 22.5 percent in the same three months in 2006.
The company blamed it mainly on tougher times in its networks business, where rapid build-outs of lower margin projects in emerging markets is pressuring profitability.
A fall in network expansions and upgrades in its mature markets have also declined, leading to lower margins, it said.
Fourth-quarter net profit fell 42 percent to 5.6 billion kronor (euro593 million; US$880 billion), down sharply from 9.73 billion kronor in the year-ago period.
For the full year 2007, net profit dropped around 16 percent to 22.1 billion kronor (euro2.34 billion; US$3.5 billion), compared with 26.25 billion in 2006.
Despite the weaker earnings, the company's board said it would propose a dividend of 0.50 kronor (euro0.05; US$0.08) per share to the annual general meeting.
Ericsson's year-end result and future forecast have been heavily anticipated by market watchers ever since the Stockholm-based company in October shocked the market with a hefty profit warning and a surprise cut in its 2007 outlook — forcing its chief financial officer to step down.
Sales for the three-month period ending Dec. 31 remained almost unchanged at 54.5 billion kronor (euro5.8 billion; US$8.57 billion) from 54.2 billion kronor in the same period the year before.
Anders Berg, an analyst at Evli Bank in Stockholm, said the result, even though lower than expected, came ''as no surprise.''
''It's a big company with operations in many countries so you can't expect things to change overnight. You don't go from a profit warning to a positive profit curve right away.''
Despite the cost-cutting plan, Berg said the company did not really deliver in its report.
When it came to Ericsson's worldwide cost savings plans, Berg said that since it will involve analysis of both internal and domestic costs, ''I think it's hard (for them) to be more specific at this point.''
''They want to keep some functions pretty intact, and so there's a bit of balancing to do there,'' he said. ''It isn't very easy to cut staff because at the same time they have obligations to fulfill to their customers.''
Ericsson shares were down 1 percent to 14.16 kronor (euro1.50; US$2.23) in Stockholm trading.
