STOCKHOLM, Sweden-Saying “profitability is not satisfactory,” the Business Area Infocom Systems division of L.M. Ericsson plans to lay off another 10,000 employees worldwide in 1998, bringing the number of displaced workers in that sector to 20,000 during the past two years. The downsizing is expected to save the company approximately $260 million.
“The goal is to simplify the supply flow and thus reduce costs, capital and lead times and increase delivery performance to customers,” Ericsson explained in a press release. “This will be implemented step by step in order to secure performance.”
Infocom Systems concentrates on advanced telecom management solutions based on both Ericsson and compatible integrated equipment, including frame-relay systems, the public intranet network and asynchronous transfer mode switches. It plans to increase its presence in the data world by developing new products and forming partnerships.
While the numbers point to 20 percent of Ericsson’s work force being cut in a three-year plan, the real number is not that large. Infocom’s first wave of laid-off employees were offered jobs in other Ericsson divisions or were outsourced to Ericsson business partners. It is not known if the next group of workers will be given the same options, although some workers are said to be moving into Ericsson’s wireless divisions. Ericsson as a whole, however, has added 24,000 workers since 1995, with 6,000 joining the company so far this year; total company employment among 130 countries is 100,000.
The division also plans to cut costs by reducing its dependence on consultants, lowering office expenses and using multimedia communications instead of paying for business travel.
Union negotiations regarding the layoffs already have begun. “We know that the changes present major challenges for our employees as well as for us as a company, and that it will be painful for many of our employees who will have to change jobs,” said Infocom Systems head Anders Igel. “Unfortunately, we have no other choice but to adapt to the new competitive and technological environment, and to take these actions to restore profitability and increase market shares. In fact, we have to do it faster than our competitors in order to secure our future as one of the leading companies.”
Igel continued, “We know that from now on, it will be more difficult to find jobs in Ericsson due to the increased technological changes also affecting other parts of Ericsson … We will do everything reasonably possible to act as a responsible employer in every country where we are present in order to minimize any negative effects on our employees.”
