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Ericsson sees 2Q in line
Mobil phone maker expects 2Q to match 1Q loss, may cut more jobs
July 6, 2001: 12:40 p.m. ET
STOCKHOLM, Sweden (Reuters) - Swedish telecom equipment maker Ericsson is likely to post a second-quarter loss in line with expectations, but delayed deliveries of third-generation systems may force the firm to cut several hundred more jobs, an Ericsson source said Friday.
Ericsson (ERICY: down $0.33 to $4.60, Research, Estimates), which lost 4.9 billion kronar ($447 million) in the first quarter due to write downs in its handset business and falling margins, said second-quarter results won't be any better.
"Second quarter was as expected," the Ericsson source said. The world's biggest producer of mobile networks and fourth-biggest handset supplier, will release its second-quarter results July 20.
An Ericsson spokesman was not available for comment.
After British telecom equipment maker Marconi warned Thursday its profit for fiscal 2001 will fall short of estimates and it will cut 4,000 jobs, investors have been concerned more bad news could come from Marconi's (MONI: down $0.28 to $3.07, Research, Estimates) peers such as Ericsson and Nokia (NOK: down $1.28 to $19.07, Research, Estimates), strongly depressing their share price.
As part of its restructuring plan, Ericsson has launched a tough efficiency program that includes job cuts of up to 22,000 people, or one fifth of the workforce, but has said that unless the market rebounds in the second half, it could end the year in the red.
"As things stand now, some more job cuts in the systems factories will be necessary, unless we get more delivery orders before the end of the summer, because the company cannot afford to have factories standing idly," the source said.
"The job cuts are likely to be accompanied by some middle-management shake-up as well."
"It is part of the company's efforts to focus on returning to positive cash flow -- to move resources to areas that bring in money," the source said. Ericsson had a negative cash flow of 17.7 billion kronar in the first quarter and made a return to positive cash flow one of its top goals this year.
To end its losses on the mobile phone business, Ericsson outsourced all production to Singapore-based Flextronics (FLEX: down $0.55 to $23.66, Research, Estimates) and formed a mobile phone joint venture with Japanese consumer electronics maker Sony Corp. (SNE: down $4.23 to $56.22,
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