Ericsson ERIC, the leading telecommunications company, is taking its previously announced cost saving initiatives to the next level by accelerating its headcount reduction initiative in Sweden. With this, the company is sticking to its goal of targeting savings of around SEK 9 billion in 2017.
As a matter of fact, Ericsson gave the green signal to its cost and efficiency program in March 2015. The company disclosed a host of activities related to this initiative that will run from 2015 to 2017. At that time, Ericsson pointed that its cost and efficiency program entails the headcount reductions and external cost saving measures, across its worldwide operations. In addition, the company stated its aim of organizing its sales, general, administration, and external expenses reductions, which include IT portfolio consolidation and trimming of consultant headcounts.
In particular, the company had considered cutting 2,200 positions, especially in R&D and Supply sections, at its Sweden operations. In continuation of this plan, Ericsson now disclosed the delivery of notice to personnel across different Swedish locations during this month. Overall, the company will bid goodbye to around 1,700 employees holding about 2,100 positions in its office.
Forward looking
Focusing dedicatedly on trimming its cost base, Ericsson anticipates to witness around SEK 3–4 billion in restructuring charges during 2015 – 2017. Notably, the company’s restructuring charges normally cost about SEK 2 billion, annually.
Specifically, for second-quarter 2015 Ericsson expects to incur roughly SEK 2.5 billion of restructuring costs. This includes cost and efficiency program charges especially related to trimming of headcount as well as regular restructuring expenses. The company anticipates reaping benefits in the form of savings from job cuts by the end of this year.
As a matter of fact, Ericsson started its business restructuring initiative way back in 2013. Since then, the company has divested its underperforming power cable and modem businesses and bought high potential companies such as Devoteam (a France-based consulting firm’s Telecom & Media subsidiary), Microsoft’s MSFT TV solution Mediaroom business, Airvana Network Solutions’ EVDO business and TimelessMIND.
Ericsson currently carries a Zacks Rank #3 (Hold). Some better-ranked wireless equipment stocks include InterDigital, Inc. IDCC and QUALCOMM Incorporated QCOM. While InterDigital carries a Zacks Rank #1 (Strong Buy), QUALCOMM sports a Zacks Rank #2 (Buy).
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