Wall Street Warms to Ericsson Firings

Ericsson (ERICY Quote) stoked a tech rally Tuesday, vowing that a new round of cutbacks will keep it on the twisting road back to profitability.

At first glance the news from the Stockholm-based wireless gearmaker didn't appear promising. First-quarter sales fell 30% both sequentially and year-over-year, while the latest-period loss ballooned by more than a billion kronor (about $120 million).

But investors who had expected little from the stumbling company were pleasantly surprised by developments on the cost side of the equation. Gross margins actually rose in the latest quarter despite the sales plunge, and the company's new chief promised to step up the firings that have reduced staffing by more than half since the telecom boom ended three years ago. The new plan will slash 7,000 jobs, taking the company's payroll to 47,000 people from more than 100,000 in 2001.

Shares were up $1.36, or 18%, to $8.81 at midday as Wall Street applauded the company's plan to return to the black this year, excluding the costs of the latest round of layoffs. ...