Ericsson share price up, to cut 2 200 jobs at home

Ericsson AB announced on Wednesday it will reduce its Swedish workforce by 2 200 employees as the next step of the companys cost-reduction efforts.

In November the worlds largest provider of mobile network equipment launched a “cost and efficiency program” as a result of falling sales and increased competition. The move puts job cuts back into Ericssons cost reduction arsenal in a time when rivals like Nokia Oyj and Huawei Technologies report better sales growth amid overall slowdown in the market for wireless equipment.

With its plan Ericsson aims to save around 9 billion Swedish crowns in annual costs, with the program set to take full-effect in 2017. However, the equipment maker projected that it would be hit by between SEK 3 billion and SEK 4 billion in charges related to the restructuring efforts.

Ericsson said the workforce trim, which represents around 2% of the companys overall staffers, will mostly affect employees engaged in research and development and supply functions. During the past year the company invested some SEK 36.3 billion into R&D, reflecting almost 16% of Ericssons full-year revenue and also up from 2013s figure of SEK 32.2 billion.

Additionally, the companys Chief Financial Officer Jan Frykhammar said that Ericsson will continue to invest heavily into developing new technologies and the current restructuring program would allow it to realize efficiency gains or cost reductions while doing so.

Ericsson said it would stick to its strategy in order to ensure future growth in certain targeted areas, which include IP networks, cloud technology and TV & media among others.

The company said it has entered into negotiations with worker unions and the targeted employees are set to receive notice in June. Stockholm, where the Ericssons headquarters are located, is expected to be hit the hardest by the lay offs accounting for more than half of them.

This is the second job cut announcement to target Sweden this week. On Monday Sony announced it would slash 1 000 jobs at its mobile facility in Lund.

Ericsson was founded in 1876 and currently operates in 180 countries, for the full-year of 2014 the company reported net sales of SEK 228.0 billion.

Ericsson dropped 1.32% on Tuesday and closed at SEK 104.90 in Stockholm. On Wednesday the stock edged up 2.29% to SEK 107.30, marking a one-year increase of 29.38%. The company is valued at SEK 349.68 billion.

According to the Financial Times, the 29 analysts offering 12-month price targets for Ericsson have a median target of SEK 105.00, with a high estimate of SEK 126.00 and a low estimate of SEK 81.00. The median estimate represents a 0.10% increase from the last closing price.