Ericsson eyes $1.2 bn savings may cut more jobs

London: Telecom equipment maker Ericsson is looking at various measures, including job cuts, to increase operational efficiencies and reduce cost by SEK 9 billion ($1.2 billion) by 2017. 

The Swedish firm in September had announced shutting down of its modems business that impacted as many as 1,582 people globally, including India. 

Ericsson is holding its Capital Markets Day in Stockholm, where it will give an update on progress on its Networked Society strategy, with focus on market development, growth agenda and profitability. 

“The telecom, IT and media industries are converging and we are confident in our choice of strategy to play a key role in this new world. We will continue to build on our combined strength of technology and services leadership to stay relevant to our customers in a transforming industry,” Ericsson President and CEO Hans Vestberg said in a statement.

The accelerated efficiency measures will primarily relate to five key areas of portfolio streamlining and ways of working in R&D; supply chain efficiencies as well as structural efficiency gains. 

“Savings will include both headcount reductions as well as savings in external costs,” the statement said. 

The company expects steady growth across all areas. The total network equipment market during the years 2013-2017 is expected to show a CAGR of 2-4%; the telecom services 4-6%; and support solutions 7-9%. 

The ambition going forward is continue to grow faster than the projected total addressable market CAGR of 3-5% in 2013-2017, it added. 

The current company transformation is uncovering opportunities to further leveraging global skills and scale to increase efficiencies and reduce cost across the business, the statement said. 

“As a result, work is ongoing to identify additional improvement activities and ways to accelerate cost reductions to achieve savings of approximately SEK 9 billion with full effect during 2017,” it added. 

As part of its continuous business transformation, Ericsson generates annual restructuring charges of about SEK 2 billion. 

“To reach the targeted SEK 9 billion savings, and with current visibility, it is estimated that the new and accelerated activities will generate an additional total SEK 3-4 billion in restructuring costs during the full duration of the three-year program,” the statement said. 

It is estimated that half of the savings will reduce Ericsson’s operating expenses and the other half will impact cost of sales, it said.