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Ericsson To Cut 5,000 Jobs As Sales Up, Profits Down

Other telecommunications equipment companies, including Alcatel-Lucent, Nortel Networks, Nokia Siemens Networks, and Motorola, haven't fared as well.
Telecom and electronics manufacturer Ericsson on Wednesday issued a "good-news, bad-news" financial report for its fourth quarter.

The Stockholm-based company said sales were up 23% in the quarter, but its net profit dropped 31%, leading Ericsson to say it will cut 5,000 jobs.

President and CEO Carl-Henric Svanberg took note of the economic recession that is spreading across the world, but said the global mobile network market should not be impacted too significantly because most service providers are financially healthy.

"There is strong traffic growth and the networks are fairly loaded," he said in the report. "To date, our infrastructure business is hardly impacted at all, but it would be unreasonable to think that this would be the case also throughout 2009."

Ericsson has been carrying out cost-reduction campaigns in recent years, including 4,000 job cuts last year. Other telecommunications equipment companies, including Alcatel-Lucent, Nortel Networks, Nokia Siemens Networks, and Motorola, haven't fared as well. All have been plagued by plunging revenue, Nortel recently filed for bankruptcy protection, and Motorola's mobile unit has been in a virtual freefall in recent months. Nokia Siemens recently forecast a decline of at least 5% in infrastructure revenue, and Alcatel-Lucent predicted a decline of 8% to 12%.

Ericsson said its net profit was $460 million in the three months ending Dec. 31. "The cash is a major asset," Svanberg said. "It will provide flexibility and expansion possibilities."

The company's mobile phone partnership with Sony has run into difficulties in recent months and acted as a drag on earnings.

As for Ericsson's North American sales, they increased by 13% in the quarter over the previous year, while full-year sales increased by 34%.

After Ericsson issued the report Wednesday, its stock rose 12%.

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