Ericsson (NASDAQ: ERIC) has announced plans to lay off 1,200 employees in Sweden to adjust to decreased demand and the cautious approach of mobile service providers towards orders.
This workforce reduction is part of a broader strategy to cut costs, which includes downsizing facilities, lessening reliance on consultancy services, and streamlining existing processes.
These job cuts, which account for approximately 8.6% of Ericsson's Swedish workforce as of the end of 2023, are currently under discussion with labor unions.
This move reflects the broader challenges facing the European telecom equipment sector, with companies like Ericsson and Nokia Corp (NYSE: NOK) needing help in recovering from a widespread spending slowdown within the mobile services industry, Bloomberg reflects.
Ericsson had previously signaled a pessimistic outlook for 2024, predicting a continued market decline outside China due to investment levels by operators being critically low.
Analysts anticipate that Ericsson will experience a surge in the latter half of 2024 due to its $14 billion agreement with AT&T Inc (NYSE: T).
The reduction in network expenditure by mobile carriers, coupled with concerns over the competitive landscape in Europe affecting investment returns, poses significant challenges for Ericsson and Nokia.
Additionally, the rise of open radio access network (RAN) technologies threatens to intensify competition by enabling carriers to diversify their vendor base more efficiently.
This announcement follows Ericsson's decision a year before to reduce its global staff by 8,500 employees, representing around 8% of its total workforce, to navigate the challenging market conditions.
Nokia, another key player in the industry, had also revealed plans to eliminate up to 14,000 jobs, or 16% of its workforce.
Ericsson stock gained 8% in last six months. Investors can gain exposure to the stock via IShares U.S. Digital Infrastructure And Real Estate ETF (NYSE: IDGT) and Defiance Next Gen Connectivity ETF (NASDAQ: FIVG).
Price Action: ERIC shares traded lower by 0.18% at $5.42 on the last check Monday.