Ericsson (Nasdaq: ERIC) is shutting down its telecom cables operation within its networks business unit due to what it says is the result of the shift from copper to fiber. Cable production is moving to Asia, where there has been a growing demand for fiber.
As a result of this closing, the Swedish company will terminate 318 employees in Hudiksvall and is talking with unions on how to eliminate 36 positions in Stockholm.
"The decision is based on the fact that Ericsson's production of telecom cables is small from a global perspective, and that we also have a small market share," said Tomas Qvist, head of special products in the networks business unit, and head of human resources for Ericsson in Sweden. "There is overproduction on the cable market in Europe."
In 2012, the vendor reported that the telecom cables operation generated net sales of about SEK 1 billion (USD 150.9 million).
Ercisson estimates that they will have to incur a $75 million restructuring charge as a result of the closing. If everything is executed on time, the vendor said that half of the restructuring charge will impact Ericsson's Network unit operating income in Q2 2013, with the remainder impacting Q3 2013 operating income.
While the cable business has struggled in recent years, Ericsson has been finding new fortunes in the professional services and software industry segments.
In April, Ericsson signed a deal to acquire Microsoft's Mediaroom IPTV business, giving it a 25 percent market share in the IPTV segment. When the deal is completed later this year, Ericsson will gain over 40 telco and OTT (over the top) video customers, including AT&T (NYSE: T), TDS Telecom (NYSE: TDS) and Netflix (Nasdaq: NFLX).
Besides building up its software business, Ericsson has won key managed service contracts in the past year with a number of large service providers such as Reliance Communications. The service provider awarded Ericsson an eight-year services contract covering its wireline and wireless networks located in north and west India.
- see the release
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