May 04, 2005, 2:41 PM — Citing poor sales, Swedish wireless communications company Telefonaktiebolaget LM Ericsson will close its U.S. CDMA (code division multiple access) unit, which is headquartered in San Diego, the company said Wednesday.
The move will cause about 250 of the unit's nearly 300 employees to be laid off over the next six to nine months, said Pia Gideon, a spokeswoman for Ericsson.
The remaining staff at the unit, called the Business Unit Mobile Systems CDMA, will be transferred to other parts of Ericsson's operations, Gideon said, noting the company will concentrate its CDMA efforts on Asia and emerging markets.
The company is closing the unit, set up in 1999, because it failed to sell enough networking gear, including base stations, to U.S. carriers, Gideon said. In addition, recent consolidation among U.S. carriers has further lowered the unit's chances of selling CDMA equipment in the U.S., she said.
"The whole market situation has changed over the last year ... the consolidation means that there is little potential for us," Gideon said.
Consolidation has reshaped the landscape of the U.S. wireless telecommunications services market. Cingular Wireless LLC last year bought AT&T Wireless Services Inc. for US$41 billion. More recently, Nextel Communications Inc. agreed to be acquired by Sprint Corp.
Ericsson's announcement that it will close its U.S. CDMA unit follows poor first-quarter results for the company's U.S. business. North America was the only region not to see improved sales for the period, the company said.
Ericsson's North America sales declined by 24 percent for the January-March quarter compared to the same period the year before, the company said in a financial statement released on April 22.
By comparison, first-quarter sales were up 26 percent year-on-year in Western Europe, 24 percent in Latin America, and 20 percent in Central Europe, the Middle East and Africa, the company said.
Ericsson had first-quarter net earnings of 4.6 billion Swedish kroner (US$651 million, as of March 31, 2005, the last day of the period being reported) on sales of 31.5 billion kroner for the first quarter of 2005. Sales were up 12 percent compared to the same quarter one year earlier, but down 20 percent sequentially due to seasonal trends, the company said.