UPDATE 1-Ericsson to cut staff in Sweden, cost in focus

* Ericsson to cut 946 staff in Sweden

* Says reduction not part of previously announced plans

(Adds background, company comment)

STOCKHOLM, Dec 8 (Reuters) - Sweden's Ericsson ERICb.ST said on Tuesday it would give notice to nearly 1,000 staff in Sweden as it looks to pare costs to compete with rivals in a market squeezed by the global downturn.

The world’s biggest telecoms network gear maker said it would close its operations in the Swedish town of Gavle, north of the capital Stockholm, with the loss of 856 jobs, and cut 90 staff from its Boras facility.

“We have to reduce the number of employees in production because the amount of labour required for our products is less and at the same time we are becoming more efficient,” the company said in a statement.

A spokeswoman for the company said the latest staff cuts were not part of a previously announced 10 billion Swedish crown ($1.41 billion) cost cutting programme.

While analysts have been worried that the global downturn would hit telecom operators’ spend on new and upgraded networks, they have been impressed by cost cutting at Ericsson, which faces tough competition from cheaper Chinese rivals.

The Swedish company said alongside its third-quarter report that it would extend its current efficiency programme, but gave no details.

The market for telecoms equipment shrank 10 percent in the third quarter, according to market-watchers Dell’Oro. [ID:nGEE5B11QS]

Forecasts for next year are less gloomy but still not rosy.

Nokia Siemens Networks [NSN.UL] expects a flat market in euro terms for mobile and fixed infrastructure and related services market in 2010. [ID:nGEE5B11C2]

Rival Alcatel-Lucent ALUA.PA forecast the market would grow 0-5 percent next year. [ID:nLJ450648]

Ericsson has consistently declined to give a forecast, but analysts believe that with a reduced cost base and boosted by the acquisition of bankrupt Nortel Networks Corp's NRTLQ.PK key CDMA and LTE assets in North America, it is in a strong position to capitalise on any upturn in the market. (Reporting by Helena Soderpalm and Simon Johnson; Editing by Rupert Winchester)