Ericsson to lay off 1,200 in home country Sweden amid 'challenging' market in 2024

NEW DELHI: Ericsson is laying off 1,200 people in its home country Sweden to improve its cost position as the gear maker expects a challenging mobile networks market in 2024, with a further contraction in volume as customers remain cautious.

“In line with managing lower volumes, Ericsson today announces proposed staff reductions in Sweden,” the Swedish gear maker said in a media statement. To this extent, it has entered into negotiations with the employee unions.

“This measure is part of the global initiatives to improve the cost position, including headcount reductions, while maintaining investments critical to Ericsson’s technology leadership,” Ericsson said, adding that it will continue to undertake initiatives to increase operational efficiency during this year but will “not be announced separately”.

In addition to the headcount reduction, the cost-saving initiatives cover various areas such as reduction of consultants, streamlining processes, and reduced facilities, according to the statement.

Ericsson, however, said it would keep executing its strategy to achieve a higher growth trajectory and to reach the long-term margin targets, through “leadership in mobile networks and a focused expansion into enterprise”.

Borje Ekholm, President and CEO of Ericsson in the company's latest annual report, said the RAN (radio access network) market remained challenging in 2023, and a further decline in volumes is expected in 2024.

"We are focused on managing what is in our control and relentlessly driving operational efficiency, while keeping intact investments that are critical to our future competitiveness. Short-term these investments will put pressure on our profitability, but they will also position us for when the market comes back," Ekholm said.

Ericsson is betting on its $14 billion contract with AT&T, under which, the two telco giants will deploy a commercial open RAN network in the United States with partners Fujitsu, Corning Incorporated, Dell Technologies, and Intel.

"As we have seen in past slowdowns, we expect the market to recover at some point," the Ericsson chief said. The key driver for the recovery would be the high pace of mobile data growth. "In itself, growing data traffic will not create growth in the mobile networks market. Instead, new uses cases, as well as new monetization opportunities, will be important drivers of growth. This will take some time to be meaningful," he said.

As per the annual report, Ericsson started reducing costs in 2022, and at the end of 2023, it achieved a gross run-rate of SEK 12 billion in cost savings in line with its target. "We expect to continue to take out costs during 2024," Ekholm had said.

Ericsson in early 2023 said it would slash 8% of its rolls – or about 8,500 jobs for cost reduction reasons. Its Finnish rival Nokia would also cut 14,000 jobs, eventually resulting in an organisation with 72,000 to 77,000 employees, compared to 86,000 employees in 2023.

The company had almost 100,000 employees at the end of last year, according to its annual report.