As part of its review of its operations, Ericsson (NASDAQ: ERIC) has decided to cease the manufacture of communications cables. The operations are part of the company’s Networks business unit.
Ericsson announced May 3 that it has agreed to sell its power cables operations to NKT Cables. Shutting down its telecom cabling operations means the company is completely exiting cable manufacturing.
The unit manufactured both copper and fiber-optic cables. However, Ericsson says the market for copper cables has shrunk worldwide. Meanwhile, while demand for fiber cable has increased, most of that demand is in Asia. That leaves little need for the current amount of cable-making capacity in Europe, Ericsson has decided.
The decision will see the closing of manufacturing operations in Hudiksvall and Stockholm, Sweden. The company says it is in discussions with the appropriate unions regarding affected personnel. Ericsson expects the shutdown to affect 318 positions in Hudiksvall and another 36 in Stockholm. Affected workers aren’t expected to be notified before this August.
"It is a tough message to bring to our colleagues in the telecom cable operations in Hudiksvall and Stockholm today,” said Tomas Qvist, head of Special Products in the Networks business unit, as well as head of Human Resources for Ericsson in Sweden. “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. There is overproduction on the cable market in Europe. Unfortunately, our production has not been operating at full capacity for a long time and has struggled with profitability."
Net sales for telecom cables operations in 2012 amounted to approximately SEK 1 billion. Ericsson’s fiber-optic cabling lines included blown fiber products and drop cables for fiber to the home (FTTH) applications, other outside plant cables, as well as various fiber interconnect products for enterprise networks.
Ericsson estimates the restructuring charges for shutting down the cabling operations will be approximately SEK 0.5 billion.
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