Philips, Ericsson to cut 6000 jobs each

Philips Electronics and Ericsson are both set to lay off about 6000 workers each.

Philips Electronics and Ericsson are both set to lay off about 6000 workers each.

Citing a "rapid downturn in the telecommunications and PC industries," Koninklijke Philips Electronics said this week it will lay off between 6000 and 7000 people, or about 3% of its workforce. Ericsson is set to lay off 6000 workers, according to a report in Tuesday's online edition of the Financial Times newspaper.

Philips expects to turn a net loss in the second quarter. The Dutch electronics giant Philips reported a first quarter net income of 106 million euros (US$94 million), down 91% from 1.14 billion euros in the year-ago period. Sales were down 1% at 8.21 billion euros from 8.33 billion euros last year.

Philips sees no signs that the economic slowdown, particularly in the US, is near its end. It expects the continuing malaise to cause low growth and high price erosion for some of the markets it is active in. As a result, net income in the second quarter before special charges is likely to be negative, Philips says.

Because of the negative sentiment, Philips has cut back capital expenditures to 2.5 billion euros, from a planned figure of 3.5 billion euros for 2001. Further reduction is possible, if needed. Also, as a cost cutting measure, Philips said it will layoff between 6000 and 7000 people. The company plans to take a one-off restructuring charge of 350 million euros in the second quarter.

Details on the restructuring will be presented during the course of the second quarter, particularly considering the activities in Sunnyvale, California-based Components and Amsterdam-based Consumer Electronics, Philips says.

Most cuts can be expected in the US and Asia, where the divisions Components and Consumer Electronics have their main operations, Daalder says, adding that he deems it likely that more job cuts will follow.

Around the world on a comparable basis overall sales for Philips were down 11% in the US, down 3% in the Asia Pacific region, flat in Europe, and up 5% in Latin America. Income from operations in the first quarter weakened in all regions, except Asia Pacific.

Ericsson says it will release its results on Friday, and will comment on the reported layoffs then. The Swedish telecommunications equipment maker is expected to announce the layoffs as part of a complete cost-cutting plan, according to the Financial Times report. The layoffs are expected to hit Ericsson's marketing, administration, research and development operations both inside and outside of Sweden, according to the report.

The company said last month it would aim to cut costs by at least 20 billion kronor ($US1.9 billion) by the end of this year. At the same time, Ericsson announced more than 2000 layoffs in Sweden as well as the closing down of two mobile phone production plants in the UK.

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