Ericsson to Increase Operating Efficiency in Times of Economic Slowdown.

Business Editors/High-Tech Writers

STOCKHOLM, Sweden--(BUSINESS WIRE)--March 27, 2001

Comprehensive Efficiency Program expected to reduce ongoing

costs by at least SEK 20 bn annually, beginning in 2002

As a response to a slow-down of the economy, Ericsson today announced that it is stepping up its efforts to streamline operations and reduce costs across its international organisation with an efficiency program.

"We have started a comprehensive review of our operations with the target to reduce costs by at least SEK 20 bn by the end of this year, to be realized in 2002 on a going forward basis," said Kurt Hellstrom, President and CEO of Ericsson. "In today's uncertain state of the economy with negative signals, Ericsson must react, and we are now taking necessary measures. We have to drive efficiency much harder, with the dedication to become more competitive than ever before."

These cost savings will be achieved predominantly outside of the manufacturing area through a fundamental review of all areas including administration, marketing and sales, supply management, and research and development. The program will affect a significant number of employees and consultants in all areas of the company worldwide as Ericsson will reduce the cost base to a slower than expected growth in the economy, the telecommunications industry and particularly the mobile phones business.

Ericsson has announced a recruitment freeze across the whole company. Ericsson will reduce the number of consultants substantially - in some areas by more than 50% - and shift work to internal resources. Additional measures will be announced when the full program is outlined by Ericsson on April 20.

"As the world leader in providing wireless infrastructure equipment and a leading supplier of wireless handsets, we remain optimistic about the medium to long-term growth and profit potential of Ericsson as well as the whole telecommunications industry," said Kurt Hellstrom. "But this efficiency program is key for us to achieve a solid financial performance in difficult economic times."

Ericsson also decided it will adjust manufacturing capacity to reflect the slower economic growth by reducing its workforce in Kumla (Sweden) from 3,200 to 1,700 employees. The Company will offer, with support of Proffice, outplacement and training programs for employees leaving the company. The costs of this measure are expected to be offset by the savings during 2001. As part of the back-to-profit program in the Division Consumer Products, the workforce in Linkoping/Sweden - soon to be outsourced to Flextronics - will be reduced to approximately 475 people, resulting in additional 600 redundancies. Ericsson, in cooperation with Manpower, will offer outplacement and training support.

In the UK plants Carlton and Scunthorpe where 1,200 people are employed, mobile phone production will be terminated effective third quarter of this year. A search for a new owner of the plants is ongoing. If needed, activities will be initiated to support the changes. The costs of this measure have already been accounted for in the fourth quarter 2000 provision for restructuring the Division Consumer Products.

Ericsson is the leading communications supplier, combining innovation in mobility and Internet in creating the new era of Mobile Internet. Ericsson provides total solutions covering everything from systems and applications to mobile phones and other communications tools. With presence in 140 countries, Ericsson simplifies communications for customers all over the world.

Read more at http://www.ericsson.com/press