On Tuesday, Telefonaktiebolaget LM Ericsson (NASDAQ:ERIC), the Swedish networks company, announced a cut of 3,000 jobs in Sweden as part of the plan to cut costs by $1 billion next year.
Ericsson planned to cut jobs, which make up around 20% of its workforce in Sweden, in R&D, sales and administration sectors. 800 people will be in R&D sector, and 1,200 will be in sales and administration. The company will also hire 1,000 people in Sweden in R&D sectors in the following three years. According to the company, the people will be hired in three years will be mainly from universities to focus on cloud software and new technologies. Currently, Ericsson has 115,000 employees in 180 countries, 16,000 of which is in Sweden. The company now has 2.5 billion network subscribers.
Ericsson planned to “reach a reduced run rate of operating expenses of 53 billion kronor during the second half of 2017.” On the one hand, the company cut local jobs and reduced scales of operations to meet the goal of cutting costs of $1 billion a year by 2017, which was set after changing its CEO in July. On the other hand, the company will also double savings of operating expenses that was previously announced.
In July, Ericsson ousted its CEO Hans Vestberg, who is not capable of reversing the trend of slumping revenue and profit. Jan Frykhammar was appointed to be the new CEO in the same month.
“Ericsson is going through a large transformation,” Jan Frykhammar said. “The measures are necessary to secure Ericsson’s long-term competitiveness as well as technology and services leadership.”