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Ericsson to slash 20,000 jobs

Hellstrom hopes for profits in 2003
Hellstrom hopes for profits in 2003

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STOCKHOLM, Sweden (CNN) -- Sweden's Ericsson has said it will cut 20,000 jobs over the next two years after posting a bigger-than-expected loss.

The world's biggest mobile phone network supplier is struggling to return to profitability as many of its telecom customers freeze, delay or cancel orders because of heavy debts and a global economic slowdown.

Ericsson has already slashed 22,000 jobs, or one fifth of its workforce, and formed a joint venture with Japan's Sony in handset-making to save 38 billion crowns ($3.7 billion) and had been expected to return to profitability this year.

But it made a loss of 3.7 billion crowns in the first quarter of 2002, or 0.38 crowns a share, compared with a net income of 421 million, or 0.05 crowns a share, a year ago.

Its stock lost more than 26 percent on Monday, hitting a five-year low of 26.18 crowns in midday Stockholm trading.

Ericsson also announced plans on Monday to raise 30 billion crowns from shareholders for possible merger and acquisition deals.

"Many operators have recently lowered investment plans further," said Chief Executive Kurt Hellstrom. "As sales will be lower than anticipated, with ongoing aggressive cost cutting we plan to return to profit at some point in 2003."


Ericsson now plans to sell shares worth 30 billion crowns to help improve its financial strength to improve its competitiveness.

Its two biggest shareholders, Investor and Industrivarden, which together account for 67 percent of votes in the company, have agreed to the move, which would take place by the end of the third quarter, said the company.

Ericsson, which posted its first loss last year, said orders in the first three months dropped 40 percent, while sales slipped 26 percent to 37 billion crowns.

"Sales of 37 billion (crowns) were clearly worse than expected, and the loss was also bigger than the market had been looking for." Jussi Hyoty, an analysts at FIM Securities, told Reuters.

"The fact that profitability will be delayed until next year was probably expected, but it's bad news nonetheless."

In an interview with CNN, Hellstrom said infrastructure sales would drop further and he could not say when an expected upturn in telecom operators' expenditure would occur. Demand for networks, which carry voice and data signals to and from mobile phones, is expected to decline by 10 percent.

"I don't think we are anywhere near to a collapse, We are gearing for a downturn. Telecom operators are announcing delays and capital expenditure has been cut. We have to make sure we can carry on through this," Hellstrom said.

Ericsson's outlook was more gloomy than its rivals Nokia of Finland and Canada's Nortel Networks. Nokia, the world's biggest mobile phone maker, said sales would grow by up to 9 percent, down from an earlier forecast of 15 percent

Its handset venture with Sony broke even in the first quarter, said Ericsson.

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