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Tuesday, 27 March, 2001, 10:55 GMT 11:55 UK
Ericsson and Nokia cut jobs
Ericsson mobile phone
The markets welcomed the company's cost cutting plans.
Telecoms giant Ericsson is to cut 2,100 jobs in Sweden and stop production at two handset plants in the UK with the loss of a further 1,200 jobs.

We have to drive efficiency much harder

Kurt Hellström
chief executive
In a separate development, Nokia announced 400 job cuts in its broadband internet division in Helsinki.

Both companies cited the need to reduce costs in the face of tough market conditions.

Ericsson's job cuts are part of a broader strategy which aims to cut costs by 2bn Swedish kronor (£136m, $195m) per year from next year.

"We are amazed at the figures they are aiming to cut costs by," said a Swedish broker.

Ericsson's cost cutting

In addition to the latest round of job cuts, Ericsson has introduced a hiring freeze, announced cuts of up to 50% in the number of consultants used, and embarked on a strategic review of several departments within the company.

"We have to drive efficiency much harder," said Ericsson chief executive Kurt Hellström.

"This efficiency programme is key for us to achieve a solid financial performance in difficult economic times."

Jeff Currington, from Morley Fund Management, welcomed the measures but said more radical surgery needs to be done to restore market confidence in Ericsson.

UK plants

The UK plants to be shut by Ericsson are at Carlton, Nottinghamshire, and Scunthorpe.

Production will stop at the plants in September.

The search is on for a new owner, though Ericsson would not contract out production to the UK plants, an Ericsson spokeswoman told BBC News Online.

About 600 of the job cuts in the Swedish towns of Kumla and Linköping had already been announced in January.

Profit warning

Ericsson's latest efficiency drive was announced soon after the company slashed its profits and sales forecasts for the first quarter of 2001.

On 12 January, Ericsson predicted losses of up to 500bn Swedish kronor (£34m, $49m), only two months after it said it expected to break even.

Sales forecasts were also revised, with Ericsson predicting that sales would be flat, having predicted a 15% rise only two months earlier.

But on Tuesday, Mr Hellström said: "We remain optimistic about the medium to long-term growth and profit potential of Ericsson as well as the whole telecommunications industry."

Mobile phone handsets

In January, Ericsson announced a plan to contract out mobile phone production.

This move will eventually slash the number of staff at Ericsson's handset units from 18,000 to 7,000.

However, many of these workers will continue making Ericsson phones, though they will be employed by the company's contractors.

Ericsson reported a 75% rise in pre-tax profits to 28.7bn Swedish kronor in 2000, with sales rising27%.

But its handset division suffered losses of 16.2bn kronor.

Following Tuesday's announcement, Ericsson's shares fell 3% before investors changed their minds about the cost cutting measures' impact.

At 1022 GMT, Ericsson shares were up 6.5%.

Since New Year, the company's share price has fallen 38%.

Nokia's shares fell 0.88 percent to 30.53 euros on the news of its job cuts.

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See also:

26 Mar 01 | Business
Time for plug and go internet?
12 Mar 01 | Business
Ericsson rings the alarm
26 Jan 01 | Business
Ericsson to stop making mobiles
20 Oct 00 | Business
Ericsson's mobile woes
23 Mar 01 | Business
Industry's mobile hopes
09 Jan 01 | Business
Nokia sales prompt telecoms slump
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