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Ericsson plans to slash 20,000 jobs

The mobile handset maker announces the impending layoffs and posts a greater-than-expected loss for the first three months of this year.

More than 20,000 Ericsson employees face layoffs after the company posted a greater-than-expected loss for the first three months of this year on Monday and announced an expected overall loss in 2002.

The telecommunications equipment maker reported a first-quarter net loss of $289 million caused by a steep decline in revenue. Sales fell by 26 percent, and orders for new equipment were down 40 percent.

In an attempt to return to profitability, Ericsson plans to reduce its global work force from 85,000 to 65,000 by the end of 2003. However, some analysts have suggested that this cost cutting doesn't go far enough. Ericsson is also planning to raise funds through a rights issue.

Ericsson's mobile handset sales division--now a partnership with Sony--broke even in the quarter. Its mobile network division sustained heavy losses, though, as network operators slashed infrastructure spending in an attempt to survive the economic downturn.

The mobile market will remain weak throughout 2002, according to Ericsson. The company agreed with Nokia's forecast last week that between 400 million and 420 million handsets will be sold worldwide in 2002. Both companies had earlier predicted higher global mobile phone sales.

On the positive side, Ericsson said that the Sony Ericsson partnership is still on target for profitability in 2002 after shipping 5.8 million mobile phones so far this year.

Shares in Ericsson and Nokia both fell in early trading on the London Stock Exchange after Ericsson's announcement.

Graeme Wearden reported from London.