OSLO, Norway-Ericsson’s mid-November confirmation that its sweeping restructuring and job slashing would lead to a 50-percent reduction in its research and development (R&D) staff struck a raw nerve in Sweden. By the end of 2003, Ericsson will halve its R&D staff to 12,000, with 3,000 of the jobs lost at home.
The Swedish Agency for Innovation Systems (VINNOVA) quickly announced its plan to ensure that key technical expertise would be protected and the nation’s proud position as a global information technology (IT) and telecommunications leader would be restored. VINNOVA wants state funds totaling 3.5 billion kronors (US$389.3 million) to pump into the suddenly ailing industry during a five-year period.
The agency’s basic goals are to prevent brain drain and maintain the level of innovation that made Ericsson what it was. According to Sus Andersson at Ny Teknik, Sweden’s leading technical news magazine, this investment will largely end in university research departments. The program is also so expensive that it is bound to be bogged down in parliament. A pre-Christmas statement promised by Sweden’s new IT Minister Ulrica Messing is likely to be just that-an indication of support that the program can begin, not some multi-billion yuletide package.
Ericsson played down the need for state support for its ex-R&D people, claiming that the company retained its engineers and the job cuts were almost exclusively in administration and production.
This put the urgency behind VINNOVA’s lobbying in a slightly odd light, but R&D cuts are the most worrying ones Ericsson can make, because they can clearly impact the company’s ability to excel in the future, no matter which direction its restructuring takes.
The company has been silent on a number of odd transactions lately, including the handover of its R&D center in Finnish Oulu to Microcell and the sale of its Settler interconnect billing product to Intec Telecom. These disposals do not seem to fit in with the emphasis on infrastructure and services, though many things can be pigeonholed under cost efficiency.
Ericsson’s reassurances about its Swedish researchers, though, seem to be overly optimistic.
Thomas Olsson, chairman of Ericsson’s engineers, published a letter in Ny Teknik stating it is “totally incorrect” that there would be no ex-staff able to help Sweden’s future research and take part in the VINNOVA plan. “It is regrettable that the company does not dare to acknowledge that there are now many capable individuals available to work for other firms, both clients and partners, but even for competitors,” Olsson wrote.
Indeed, there are signs that competitors have been waiting for this since the first warnings of cuts in May. Chinese Huawei Technologies has been operating in one of Sweden’s tech capitals, Kista, for two years, and has reportedly been wooing Ericsson technicians through its local company Atelier Telecom.
Slash and redefine
Ericsson’s ruthless restructuring, according to Chief Executive Officer (CEO) Kurt Hellstr
