Belt-tightening comes to the global wireless industry

Faced with the outlook of a slowing global economy, wireless giants L.M. Ericsson Telephone Co. and Nokia Corp. announced cutbacks, layoffs and changes in their business strategies on Tuesday.

At Stockholm-based Ericsson, a global efficiency program was unveiled to help cut costs by at least approximately US$2 billion annually starting in 2002. The company placed a freeze on recruiting and said it would lay off at least 2,100 employees in Sweden and England. Ericsson also plans to drastically reduce the number of consultants it uses, in some areas by more than 50 per cent, while shifting work to employees.

More details of the cost-cutting program will be released at the company’s first-quarter earnings conference April 20, according to a spokeswoman.

Espoo, Finland-based Nokia said that its Nokia Networks infrastructure arm would refocus its broadband systems division into two business units to improve service and reduce costs. The new units will separately focus on providing broadband access and narrowband access to customers.

Kurt Hellstrom, president and CEO of Ericsson, said in a statement that because of recent economic uncertainty around the globe, “Ericsson must react, and we are now taking necessary measures. We have to drive efficiency much harder, with the dedication to become more competitive than ever before.”

Hellstrom said the cost savings will primarily come from non-manufacturing areas, including administration, marketing and sales, supply management, and research and development.

Hellstrom said he remains “optimistic about the medium to long-term growth and profit potential of Ericsson, as well as the whole telecommunications industry,” adding that the cutbacks will help the company survive the difficulties it faces today.

Olli Oittinen, Nokia Network’s senior vice-president of broadband systems, said in a statement that the company is making adjustments now “to proactively develop our mode of operation to meet and exceed customer expectations and to adapt to the new market conditions and increased competition.”

The broadband systems unit will reduce the size of its research and development network, which is currently made up of nine sites, according to the company.

Also planned are layoffs of 300 to 400 workers due to undisclosed changes in operations coming in the second quarter of this year, the company said.

Alan Reiter, president of Wireless Internet & Mobile Computing, a consulting firm in Chevy Chase, Md., said the economic moves by Ericsson and Nokia fit the pattern being adopted by many companies in all market sectors today.

“None of these actions are a surprise,” Reiter said. Cutbacks have been occurring throughout the wireless industry recently, as evidenced by the cancellation of three wireless industry conferences in the last couple of months due to a lack of attendees, he said.

Not all of the problems can be blamed on the slowing economy, though, Reiter said.

Part of the slowdown comes from wireless companies themselves, because they’ve failed to provide the wireless applications and solid implementations sought by businesses and consumers for wireless products, he said. Some of it is from poor marketing of their offerings and even outright “lying about their capabilities and calling them wireless Internet when they’re not,” Reiter said.

“It’s all catching up with the industry,” he said, “and with the economy not booming, wireless is not immune either.”

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