Ericsson says Swedish staff cuts running ahead of plan

STOCKHOLM (Reuters) - Struggling telecom equipment maker Ericsson ERICb.ST said on Thursday sweeping staff cuts in its Swedish home market were running ahead of schedule, resulting in higher restructuring costs this year.

Ericsson workers walk outside the Ericsson factory in Boras , Sweden, October 4 , 2016. TT NEWS AGENCY/Bjorn Larsson Rosvall via REUTERSA/File Picture

The company said in October it was cutting about a fifth of its Swedish workforce and hundreds of consultants as it grappled with shrinking markets and competition from China's Huawei [HWT.UL] and Finland's Nokia NOKIA.HE.

There has been speculation among analysts and staff at Ericsson about whether the company might need further cost savings to deal with tough market conditions and one analyst said it looked like more jobs could go be lost globally.

The company said it expected restructuring costs this year of 5.5-6.5 billion Swedish crowns ($606-717 million), higher than a previous estimate of 4-5 billion.

“Restructuring charges for 2017 are expected to somewhat decrease as a consequence of faster implementation of the Swedish reduction activities,” the company said.

A precise estimate will be announced in January.

The company announced a plan in October to shed 3,000 jobs in production, research and development and sales in Sweden and cut 900 consultancy positions.

Around 820 jobs are to go at Swedish plants in Kumla and Boras, while 1,600 employees had taken voluntary redundancy, helping the company towards its targets. No further forced staff cuts were planned in Sweden.

Redeye analyst Greger Johansson said the firm will probably need to look overseas for further reductions.

“There may be more staff cuts abroad even if there will be no more in Sweden in the short term,” he said.

Per Norlander, a union representative for the Swedish Association of Graduate Engineers, said Swedish operations could not take any more job losses without losing critical mass.

“Whether management wants to save more is anyone’s guess, and will most likely be decided based on the Q4 report,” he said.

Founded in 1876 as a maker of telegraph equipment, Ericsson is one of Sweden’s biggest employers with a global staff of 115,000 in 180 countries.

Ericsson said it had reduced staff in several countries this year as part of ongoing cost cuts, including Britain, Spain and the Unites States, but declined to comment further.

“If we should have a need to reduce in some countries, we will inform affected employees first,” a spokeswoman told Reuters.

Ericsson shares have slumped 40 percent year-to-date. The company is wrestling with a drop in spending by telecoms firms, with demand for next-generation, 5G technology still years away, and weak emerging markets.

Veteran board member Borje Ekholm is due to take over as CEO in January after Hans Vestberg was ousted in July due to the company’s poor performance. Most analysts say he faces an uphill task to steer Ericsson through its worst crisis in a decade.

Writing by Mia Shanley,; editing by Alistair Scrutton/Keith Weir