Ericsson reports profit drop, to cut 5,000 jobs

STOCKHOLM, Sweden - LM Ericsson shares gained more than 11 percent Wednesday after the wireless equipment maker posted fourth-quarter earnings that beat expectations dimmed by the global economic downturn.

Ericsson said net profit dropped 31 percent, mainly due to restructuring costs, and announced it would trim 5,000 jobs as part of continued efforts to streamline operations amid uncertainty in the market.

Still, sales were strong in Ericsson's core network infrastructure business, more than offsetting a weak performance by the company's handset unit, Sony Ericsson.

Chief Executive Carl-Henric Svanberg said the former was "hardly impacted at all" by the economic slowdown, but added "it would be unreasonable to think that this would be the case also throughout 2009."

Net profit in the quarter fell to 3.9 billion kronor ($465 million) from 5.6 billion a year earlier.

Ericsson said the results included about 3 billion kronor in restructuring charges and "a dramatic drop" in the contribution from Sony Ericsson. The joint venture with Japan's Sony Corp. last week said it had swung to a fourth-quarter loss of euro187 million ($243 million).

Sales received a boost from a weaker krona, rising 23 percent to 67 billion kronor, from 54.5 billion kronor a year earlier, the Stockholm-based company said. SEB Enskilda analyst Mats Nystrom said the strong sales were the biggest surprise in what he called a "really good quarter" for Ericsson.

The share price closed at 62.60 kronor in Stockholm, up 11.8 percent.

The world's leading maker of mobile broadband infrastructure said it released the fourth-quarter report a week ahead of schedule because it exceeded market expectations.

Svanberg said that telecom operators, who build their networks with equipment from Ericsson and its competitors, still have healthy finances despite the downturn.

"It remains, however, difficult to more precisely predict to what extent consumer telecom spending will be affected and how operators will act," he said.

Nortel Networks Corp., once one of Ericsson's biggest competitors, last week filed for bankruptcy protection in Canada and the U.S., becoming the first major technology company to take that step in the economic downturn.

Ericsson said it would cut 5,000 jobs, or more than 6 percent of its 79,000-strong work force, widening its savings program in a bid to stay competitive. "We're doing this of course because of the uncertainty in the market," Svanberg said in a Webcast news conference with analysts and journalists.

Ericsson said full-year net profit fell 48 percent to 11.3 billion kronor in 2008, from 21.8 billion kronor in the previous year. Sales grew 11 percent to 209 billion kronor.

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Associated Press Writer Louise Nordstrom contributed to this report.

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