Ericsson, Microsoft, Intel Layoffs: Mobility Upheaval

When it comes to layoffs, 5,000 seems to be the magic number. Intel Corp., Microsoft Corp. and Ericsson are all part of the club. And mobility is at the heart of the problem.

Intel, which is expected to announce between 5,000 and 6,000 job layoffs very soon and Microsoft, which is worried about shoring up profits, are both seeing a move away from traditional PCs and a trend toward sub-$500 netbooks and iPhones: a sign that A) people are settling for cheaper devices with less functionality in worsening economic times, and B) mobile data use and cloud services are becoming increasingly mainstream.

But more interestingly, the relatively financially healthy Ericsson’s reason for axing its workforce is simply, blame it on the evolution of mobile networks. They’re just too cheap to make.

CEO Carl-Henric Svanberg said yesterday that things were just fine at the telecom equipment maker, which enjoys plenty of high-profile contracts with the likes of AT&T Inc. and T-Mobile USA for building and upgrading 3G, new deals around the world for HSPA+ 21mbps upgrades and even a contract for LTE with TeliaSonera. In fact, the mobile infrastructure market is going gangbusters thanks to the aforementioned mobile data use/cloud services trend. But the evolution to less complex, IP-based architectures like LTE means selling less stuff: newer networks require fewer software platforms and often, network elements are shared. The layoffs, he said, are to reflect this and also to streamline the business in case carrier builds do falter later in the year.

Wireless networks might be a bright economic spot for now, but wireless handsets, not so much. Ericsson did see a 39 percent drop in profit this quarter, thanks to losses in its handset venture with Sony. This seems to be par for the course: other than Apple Inc., which had a strong quarter on the back of the iPhone, handsets seem to be a shaky business. Just ask Motorola Inc., or Samsung, or No. 1 phone-maker Nokia, which reported a 69 percent drop in profit on Thursday.

Analysts are chalking this up to flat growth in the non-smartphone category, and when it comes to smartphones themselves, there’s a lack of innovation, lack of support for the new, faster networks, too much me-too-ness (touchscreens, anyone?) and the undeniable dominance of just one or two players (BlackBerry, iPhone).