17,000 axed as Ericsson taps market for £2bn

The Swedish mobile phone company Ericsson yesterday warned it would not return to profit until next year as it unveiled plans to tap investors for 30bn Swedish kronor (£2bn) of new money.

Furthermore, the company announced plans to cut 17,000 jobs around the world this year and next in an effort to cut costs and restore profits.

The moves, which came just days after its rival Nokia slashed its sales forecasts, hit the telecoms sector hard and sent shares in Ericsson down 24 per cent. Nokia dropped 4 per cent.

In addition, the US telecoms equipment maker Lucent yesterday cut another 6,000 jobs, or around 11 per cent of its workforce, as it reported a 40 per cent drop in second quarter sales.

"An improvement in the telecommunications equipment market during the second half of this year was generally anticipated. However, as many operators have recently announced reduced investment plans, we now believe that market conditions will remain weak well into next year," Ericsson said.

The company said it now expected sales of mobile networks to fall more than 10 per cent this year compared with its previous guidance of "flat to down 10 per cent".

The warning came as Ericsson reported weaker-than-expected first quarter pre-tax loss of Skr5.4bn, compared with a loss of Skr4.9bn last time. Sales fell 26 per cent to Skr37bn.

Kurt Hellström, the president and chief executive, said: "As expected, this past quarter was very challenging. Many operators have recently lowered investment plans further. As sales will be lower than anticipated, with ongoing aggressive cost cutting we plan to return to profit at some point in 2003."

Last year the companyshed about 22,000 jobs.