Update: Job cuts loom over Ericsson-Marconi deal

Ericsson's large bite out of Marconi spells one thing for sure - job cuts.

Speaking at a press conference today, Carl-Henric Svanberg, CEO of the Swedish telecoms equipment manufacturer, said redundancies will have to occur for the buyout to be profitable.

Svanberg said: "When it comes to jobs in the UK it is clear we have acquired Marconi for its abilities, products and competence and they will bring skills and values to us.

"But it is clear that with a business that is running at a loss restructuring is necessary. Of course if we didn't do that we couldn't get the profitability, then we couldn't secure the long-term prospects."

Reports have said Svanberg intends to cut 1,000 Marconi jobs, while 6,500-plus employees are expected to move to Ericsson as a result of the deal. But he was unwilling to talk specifics.

"We are not able to go into any particular estimates of that kind," he said. "We can't get into any particular numbers. We have said 15 to 20 per cent of the entire workforce that we take over could be eventually affected."

Svanberg repeated that the deal meant the company could target broadband, IP and mobile converged networks. He said transmission networks were one of the biggest gains of the transaction.

"We're seeing new entrants from Asia and elsewhere and more efficient business models," he said. "It's all about having global presence and the operators are gathering presence over borders. All this is generating traffic and requires enhanced switching but more than that it needs more capacity in the transmission networks.

"We are bringing mobile, telephony and internet data together. This is happening in the US. You see offerings of this kind with BT, for example."

Mike Parton, CEO of Marconi, later denied that the company's failure to win a contract on BT's 21CN project was the reason for the sell.

He said: "You are assuming this has happened just because of 21CN. We have had very strong performance and eliminated losses but that's not good enough. The issue was how do we move forward? It was inevitable.

"One of the directions was we work with a partner and that's exactly what's happening here with Ericsson. This is a very logical thing. It's the sort of thing we would have been trying to do anyway."

Earlier today, analyst house Ovum wrote in a research note that the deal was all about convergence and gaining territory in the network world.

Analyst Jean-Charles Doineau said: "This acquisition is all about network convergence. Buying some of Marconi's assets, Ericsson complements its product portfolio in areas which will be of a very strategic importance for mobile operators and for convergent network operators, at the same time."