STOCKHOLM, Sweden - Wireless equipment maker LM Ericsson AB reported a sharp drop in fourth-quarter net profits and said Friday it would lay off around 1,000 employees in Sweden because of costs cuts.
At a news conference later Friday, Ericsson's CEO Carl-Henric Svanberg said additional job-cuts worldwide are forthcoming in order to reach an annual cost cut goal of $629 million.
"Totally in the world... As a rule of thumb, I'm sure that a thousand (people) per billion is probably in the neighborhood of where it's going to end up," Svanberg said, without elaborating. All parts of Ericsson's business would be effected by the savings, he said.
"What we're doing is to adjust to a slower market," Svanberg said. "We're taking action to safeguard our competitive position."
One-time costs are expected to reach around $629 million.
Most of the cuts would be completed next year and most of the layoffs in Sweden would be made through voluntary programs "as far as possible."
The company also said that although industry fundamentals and consumer behavior back a positive longer-term outlook, "we find it prudent to plan for a flattish mobile infrastructure market" in 2008 on the back of slowing market growth in the past year.
Operating margin for the quarter fell to 14 percent, from a previous 22.5 percent in the same three months in 2006.
The company said expansion in lower margin emerging markets is pressuring profitability.
A decline in network expansion and upgrades in mature markets have declined, leading to lower margins there as well, it said.
Fourth-quarter net profit fell 42 percent to 5.6 billion kronor ($880 billion), down sharply from 9.73 billion kronor in the year-ago period.
For the full year 2007, net profit dropped around 16 percent to 22.1 billion kronor ($3.5 billion), compared with 26.25 billion in 2006.
Despite the weaker earnings, the company's board said it would propose a dividend of 8 cents per share at the upcoming annual meeting.
Ericsson's year-end result and future forecast have been heavily anticipated by market watchers ever since the Stockholm-based company in October shocked the market with a hefty profit warning and a surprise cut in its 2007 outlook — forcing its chief financial officer to step down.
Sales for the three-month period ending Dec. 31 remained almost unchanged at 54.5 billion kronor ($8.57 billion) from 54.2 billion kronor in the same period the year before.
Ericsson shares fell 3.5 percent to close at 13.80 kronor ($2.17) in Stockholm.
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