Ericsson Plans to Exit Mobile Phone Production Business
Ericsson, the world's third-largest mobile phone maker, is getting out of the business of making phone handsets so it can focus on its core business of developing wireless technology and network equipment.
Ericsson, which disclosed the plan today as it reported a 63 percent plunge in fourth-quarter earnings, is selling its handset factories to an outside manufacturer, but will continue to sell its own brand of phones produced by those plants.
The move out of handset production had been widely expected as Ericsson has long suffered weakness in that business. Analysts said the move will strengthen the company's position as a leading force in the industry's move toward advanced wireless technologies that will enable mobile devices to connect with the Internet.
"They also get rid of the parts that have brought the Ericsson shares downstream the past years," said Paer Johansson, senior wireless executive with Noblestar, a Swedish consulting company that works with Ericsson. "They can totally focus on the systems side and developing applications as well as infrastructure and by that be a more competitive technology supplier."
Ericsson said it had signed a deal under which Singapore-based Flextronics International will take over its mobile phone production facilities in Brazil, Malaysia, Sweden, Britain and parts of a U.S. plant in Virginia.
The deal with Flextronics, which will include the transfer of 4,200 employees and the layoff of about 700 others, is to take effect April 1, subject to final agreements.
It also signed an agreement to have the Taiwanese electronic manufacturer GVC handle some of its product development and production, complementing its partnership with Arima of Taiwan on entry-level phones.
Chief executive Kurt Hellstroem said the moves are designed to save $1.6 billion in costs a year starting next year.
Ericsson's fourth-quarter net income dropped to $239 million, or 3 cents per share.
Its consumer product division's profit fell $1.6 billion.
The company blamed delivery problems and an inadequate entry-level product mix that hit sales and gross margins, as well as an aggressive restructuring program for the phone operations that brought additional costs.
For the year, Ericsson earned $2.2 billion. Net sales rose 27 percent to $29 billion.
Ericsson, which has more than 105,000 employees in 140 countries, said it expected continued strong growth for systems and lower sales for phones. BACK TO TOP
Georgia-Pacific Reports Fourth-quarter Loss
Paper and tissue giant Georgia-Pacific posted a fourth-quarter loss today as a result of huge special charges for a mill closure and a major acquisition as well as lower demand for its products.
The maker of Dixie Cups, Northern Quilted toilet paper and Brawny kitchen rolls reported a net loss of $187 million or 98 cents per share, compared with income of $175 million or $1.00 a share, a year earlier.
Even before the charges, the results fell far short of Wall Street's already lowered expectations.
The company said in a statement that it took after-tax charges of $184 million, or 96 cents a share, primarily for a write-down of the Georgia-Pacific Tissue assets, which is being divested, and the closure of a paper mill at Kalamazoo, Mich.
Excluding the charge, it said, it lost $3 million, or 2 cents a share, for the quarter.