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Ericsson to Cut 5,000 Jobs (Update)

Updated from 3:49 a.m. EST

Ericsson (ERIC) shares were rising Wednesday after the telecommunications equipment maker announced plans to cut 5,000 jobs as fourth-quarter earnings declined 31% to 3.9 billion kronor ($430.9 million) from 5.6 billion kronor a year earlier.

The Swedish company said Wednesday sales rose 23% to 67 billion kronor on "good demand" for the company's "portfolio and across the world." Ericsson said professional services have continued to show strong growth. But the company has been "affected by the economic downturn and the declining demand in the consumer market and has taken necessary actions."

Earnings also declined because of a "dramatic drop" in the contribution from its handset unit, Sony Ericsson. The joint venture with Japan's Sony (SNE) last week swung to a fourth-quarter loss of 187 million euros ($243 million).

Ericsson said it has recorded fourth-quarter charges of 2.3 billion kronor and full-year charges of 6.7 billion kronor, resulting in cost savings of 6.5 billion kronor.

The company said it expects further restructuring charges in 2009 estimated at 6 billion to 7 billion kronor, with annual savings of 10 billion kronor expected by the second half of 2010.

Ericsson said it plans to reduce consultants and other temporary staff, and consolidate research and development sites. Of the 5,000 job cuts, 1,000 will be made in Sweden, primarily in Stockholm, the company said.

CEO Carl-Henric Svanberg warned that the financial downturn makes it "difficult to more precisely predict to what extent consumer telecom spending will be affected, and how operators will act."

Shares were up 13.65% to $7.50 in Wednesday mornign trading.

Copyright 2008 TheStreet.com Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed. AP contributed to this report.

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