Ericsson plans to lay off twenty per cent of its workforce in its home country of Sweden in order to help it cut costs as demand for its products has decreased steadily over the past few years.
The company, which produces specialty network equipment for telecoms, is facing even greater competition from its rivals. The Chinese company Huawei has begun to expand into the European market which Ericsson has controlled for years and the Finnish company Nokia has also begun to detract from its business as well.
On Tuesday, Ericsson announced its intention to cut 1,000 positions in its production division, 800 in research and development, as well as 1,200 in other divisions such as sales and administration. This makes for a total of 3,000 positions that will be cut across the company's workforce of 16,000 in Sweden. Two months ago, Ericsson made the decision to remove its chief executive Hans Vestberg as he was unable to reverse the company's declining profit and revenue. Jan Frykhammar was then appointed as the acting CEO in late July.
A great deal of Ericsson's problems stem from the fact that mobile-service providers are no longer spending what they were to develop their 4G mobile networks. This puts the company in a position where it is no longer able to sell its cellphone towers and switches while both Huawei and Nokia have expanded into its territory.
Ericsson is now placing its bets on the fact that mobile carriers will adopt the latest generation of wireless networks, known as 5G, as quickly as they did with the previous generation. It also believes that the Internet of Things and cloud computing will play a role in revitalising is business.
Fryhammar was quick to defend the move, saying: “Ericsson is going through a large transformation. The measures are necessary to secure Ericsson's long term competitiveness as well as technology and services leadership.”
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