Mega-vendor Ericsson is cutting 8,500 jobs in an effort to save $859 million. Earlier this week the company said it would cut 1,400 jobs in Sweden. The cuts are included in the 8,500, according to several media outlets, including Reuters today.
Ericsson employs 105,000 people worldwide. The company reported its fourth-quarter and full-year 2022 earnings on Jan. 20, 2023. During the earnings call, the company said its Q3 supply chain challenges had eased in Q4, but economic headwinds remained strong causing business uncertainty in the near-term.
“We remain positive on the long-term outlook for our business. However, the near-term outlook, as we also described at our Capital Markets Day, remains uncertain,” Börje Ekholm, President and CEO of Ericsson, commented on the earnings report. “We expect operators to continue to sweat assets in response to macroeconomic headwinds. In addition, we expect operators to adjust inventory levels as supply situation eases.”
These trends started to impact Networks in Q4 and the company expects “them to continue at least during the first half of 2023,” said Ekholm. “At the same time, we expect good growth from market share wins, albeit not fully offsetting the near-term headwinds. In the longer-term, capex is driven by traffic growth. Given near-term macroeconomic headwinds, we expect Enterprise to grow somewhat slower than during 2022.”
During Ericsson’s Mobile World Congress 2023 preview and press day in London on Feb. 9, the company was all sunshine and daisies while Fredrik Jejdling, executive vice president and head of business networks, touted new 5G radios, indoor 5G and 6G “pervasive digital infrastructure.”
Indeed, Ericsson’s 5G infrastructure business in India remains a bright spot. During its earnings call, Ekholm said the company’s “networks business grew in India on the back of significant market share gains,” however, “as anticipated, the growth from share gains in several markets could not fully compensate for reduced operator capex and inventory reductions in other markets, including North America.”
As a result, the vendor’s North American business seems the likely victim of the job cuts.
Stepping all the way back from the obviously grim headline, it is hard to see how Ericsson is not well placed, longer term, to capitalize on the global shift to true 5G networks.
"I do not foresee the layoffs impacting the cloud-native 5G infrastructure teams, which is a vital technology in moving forward in the progress of 5G," Dave Bolan, research director at Dell'Oro Group, told Silverlinings.
Silverlinings reached out to Ericsson for comment but had not received a response as of press time.
At time of publication, Ericsson’s stock (NASDAQ: ERIC) was trading at $5.49, down 1.82%.
This is a developing story.