Ericsson to Lay Off 8% of Workforce Globally to Cut Costs

Rafaela Lindeberg, Bloomberg News

Projected logos on the wall of a room at the Ericsson AB stand on day two of the MWC Barcelona at the Fira de Barcelona venue in Barcelona, Spain, on Tuesday, March 1, 2022. Over 1,800 exhibitors and attendees from 183 countries will attend the annual event, which runs from Feb. 28 to March 3. Photographer: Angel Garcia/Bloomberg , Bloomberg

(Bloomberg) -- Ericsson AB, one of the world’s biggest providers of 5G networking equipment, plans to cut 8,500 staff worldwide to reduce expenses after the market for its telecommunications gear stopped growing.

The bulk of the cuts at the Swedish maker of mobile networks will take place during the first half of the year, although some will be in 2024, the company said in an emailed response to questions on Friday.

The Ericsson job cuts are the latest announced in a telecommunications industry that has stumbled due to the weakening global economy and rising inflation. UK telecom group Vodafone Group Plc announced plans for hundreds of layoffs earlier this year.

“We see a potential to simplify and become more efficient throughout the company, especially when it comes to structural costs,” Ericsson spokesperson Jenny Hedelin said.

Shares shares of Ericsson fell less than 1% at 2:53 p.m. in Stockholm on Friday. The stock is down 4.6% this year after sliding almost 40% in 2022.

The cuts are equivalent to 8% of Ericsson’s workforce and part of a plan laid out in December to cut 9 billion kronor ($862 million) in costs by the end of 2023. The company had previously forecast that the savings this year will come mainly from reductions in the costs of goods sold.

Activist shareholder Cevian Capital AB, which has been calling for Ericsson to “drain the swamp of losses,” said it welcomed the move.

“This is an important step to tackle the profitability problems in the structure,” Christer Gardell, Cevian’s managing partner and founder, said in emailed comments.

Cevian, which first invested in the Swedish telecommunications networks maker in 2017 and now has a stake of about 5%, is looking to name a director to the board at an upcoming shareholder meeting in March.

Ericsson reported a bigger-than-expected drop in fourth-quarter earnings last month after some of its major 5G customers pulled back on spending in an uncertain economic environment.

Read More: Ericsson Sees ‘Uncertainties’ After Earnings Miss Estimates

Reuters reported the news earlier.

--With assistance from Alastair Reed, Anton Wilen, Veronica Ek, Kati Pohjanpalo and Love Liman.

(Updates with additional context throughout, and shares in fifth paragraph)