Ericsson Climbs on Report of Staff Cuts of Up to 20 Percentby
Svenska Dagbladet suggests retreat from some business lines
CEO Vestberg is under pressure to reduce costs as sales slip
Ericsson AB rose the most in almost a year after newspaper Svenska Dagbladet reported that the Swedish maker of mobile-phone networks plans to cut as many as 25,000 employees, or about 20 percent of its workforce, amid cutthroat competition and shrinking sales.
The stock rose 7.8 percent to 64.60 kronor at the close in Stockholm, giving the company a market value of 215 billion kronor ($26 billion).
Ericsson is locked a global battle with rivals Huawei Technologies Co. and Nokia Oyj in a stagnant market for phone-network equipment. First-quarter profit and sales missed analysts’ estimates, weighed down by slumping markets like Brazil and Russia, leaving Chief Executive Officer Hans Vestberg under pressure to cut costs.
Ericsson plans to focus on improving its profitability and increasing more lucrative software sales, and has started to take steps including staff reductions, Vestberg told Bloomberg TV on April 21, without disclosing numbers.
A spokeswoman declined to comment on the Svenska Dagbladet Wednesday, which suggested Vestberg may retreat from some business lines.
With much of the so-called fourth-generation networks already built in the U.S. and China, Ericsson has been carving out business units targeting media and enterprise customers to expand beyond wireless networks to get back to growth. But the stock has lost 43 percent since reaching a more than seven-year high in April last year.
Last month, Ericsson’s second-biggest shareholder, Industrivaerden AB, was unusually candid in its critique of the mobile-network manufacturer, saying its shares had underperformed in the face of market changes.