Ericsson moves 1,000 staff to HP

STOCKHOLM: Swedish telecoms equipment maker Ericsson said it would transfer about 1,000 employees to Hewlett-Packard as part of a five-year outsourcing deal for its Information Technology operations worldwide. The deal, of an undisclosed value, will help Ericsson, the world's biggest producer of mobile networks, meet its goal of returning to profit sometime this year on a shrinking market.

Ericsson signed a memorandum of understanding with Hewlett- Packard on the deal in April but did not say then how many staff would be affected. In the red for 10 straight quarters, Ericsson wants to cut its workforce to 47,000 in 2004 from 61,000 now, and outsourcing non-core businesses is one of the ways to do it.

"Outsourcing of IT operations is part of Ericsson's...overall restructuring program aiming at radically reducing the operating expenses and cost of sales," Ericsson deputy chief executive Per-Arne Sandstrom said in a statement.

The transfer of staff and assets to Hewlett-Packard will start in July, Ericsson said. HP will manage data centres, the help desk and computer desktops in more than 100 countries.

The deal does not cover Information Systems operations -- the development, implementation and management of applications, which Ericsson also wants to outsource around mid-year. IBM, the world's biggest computer consultancy, is seen in the industry as a top candidate to buy the business because it has the cash and the expertise to cover all areas of the unit's operations. Other contenders include the Nordic region's biggest IT consultancy TietoEnator, Accenture and Electronic Data Systems (EDS).

EDS is already running Ericsson data networks, UNIX and NT servers, personal computers and tele-networks in 16 European countries. It won the deal in the middle of 2001 for three years, with a possible two-year extension. Ericsson shares traded 1.3 percent lower at 7.7 crowns at 1035 GMT, under-performing the sector by 1.7 percentage points.

© Reuters