Ericsson is letting go 8,500 workers, the biggest layoff the telco industry has seen so far

• The layoffs at Ericsson will impact 8% of its workforce of 105,529 staff worldwide.
• The move is part of its cost-cutting measures, the company memo reads.
• A spokesperson said most layoffs would take effect in the first half of 2023 but could extend into 2024.

Swedish telecommunications equipment giant Ericsson plans to let go of 8,500 employees in the most extensive layoff the telco industry has seen this year. The move is part of a significant cost reduction effort, the company confirmed last week. The layoffs at Ericsson would take effect in the first half of this year and could extend into 2024.

Based on a report by Reuters, the layoffs will affect roughly 8% of the 105,529 workforces at Ericsson. Out of the total announced, 1,400 employees were laid off earlier this week in Sweden, where the company is headquartered. The cost-cutting plan will save roughly US$880 million by the end of 2023.

An Ericsson spokesperson confirmed with CNBC that the cuts, as announced during the company’s Capital Markets Day on December 15, last year, were part of an “acceleration of structural cost reductions efforts.” The spokesperson also noted that the headcount reductions would be managed differently, depending on the local country practice,” the spokesperson said in a statement to CNBC.

Ericsson also said it expects to start seeing the effect of its cost savings in the second quarter of this year. While Ericsson did not disclose which geography would be most affected, some analysts predicted North America would likely be most concerned. According to its website, the company employs about 11,994 people in North America,

Tech companies laid off at least 160,000 workers in 2022, according to Layoffs.fyi, a site that tracks job losses in the industry. The cutting has continued into 2023, with more than 100,000 additional people losing their jobs. In an email to Light Reading, Ericsson also shared that they see the potential to simplify and become more efficient across the company, especially in structural costs. 

“But we are also working on our service delivery, supply, real estate, and IT. It will, however, unfortunately, result in a need to address headcount,” it added. To recall, the current scale of layoffs by Ericsson is not new. The Swedish company’s last big round of layoffs came after Börje Ekholm joined the company as CEO in early 2017, when the operator cut a net total of 10,729 jobs, according to its annual reports. 

Following that, Ericsson trimmed its workforce with another 5,376 layoffs in 2018. Those layoffs were primarily attributed to the company’s decision to quit various non-core activities and focus on restoring profitability, as its central networks unit was mainly held responsible. After those two rounds, the company gained 10,170 employees through takeover activity and expansion, leaving it with 105,529 employees at the end of last year.

The recent US$6 billion acquisition of Vonage also brought a couple of thousand workers into Ericsson. Moreover, Ericsson had recently combined two formerly separate units – digital and managed services – to create a unified cloud software and services division. Since a takeover would often lead to a surplus in staff, a headcount reduction is inevitable, considering Ericson has been practicing cost-cutting measures.

Even the company’s profitability has been under pressure as it saw a 15% drop in operating income to SEK27 billion (US$2.6 billion) last year, despite sales growing by 17% to about SEK271.5 billion (US$26 billion). In his published remarks for the recent earnings report, Ekholm blamed the “inflationary environment” and drew attention to cost-saving targets. 

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