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Ericsson’s revolving door highlights strategic direction

Ericsson made two announcements on Wednesday that underscored the firm’s strategic direction, and the challenges it faces in managing costs. First it revealed that it will be laying off some 950 Swedish manufacturing staff – five per cent of the entire workforce – and, second, it trumpeted a new managed service win with Romanian fixed carrier Romtelecom. This deal involves Ericsson taking on 400 workers from the Romanian telco.

The majority of the Swedish job cuts will centre on the firm’s infrastructure factory in Gavle, the firm said. “We must reduce our production staff because the labour requirement for our products is diminishing as we increase efficiency,” Ericsson Chief Executive Carl-Henric Svanberg said in a statement.

That is doubtless true. Ericsson has pledged to make savings of SEK10bn by the middle of 2010 and headcount reduction is a key part of this. A further 5,000 staff are expected to lose their jobs as part of the firm’s bid to meet this target.

But that reduction is not so easy to keep on track when the firm is absorbing staff from carrier customers that are signing multi-year managed services contracts with Ericsson. The industry leader in managed services, Ericsson’s 2009 wins include Du, O2, Zain, Vodafone, 3UK, T-Mobile and Sprint. The last of these saw Ericsson take on 6,000 Sprint employees as part of the deal.


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