Ericsson Shuts Modem Business; To Cut 1000 Jobs

Ericsson, the multinational technology service giant, announced Thursday that it will discontinue developing its LTE thin modems and shift the investment into radio networks and research and development. About 1,000 employees are expected to lose their jobs as a result of the shutdown.

"The change in strategy for modems comes as the company completes its previously communicated evaluation of the future of the modems business," the company said in a statement.

The decision comes amid falling prices of modems. Ericsson said that though it will shut the loss-incurring department, it will expand its R&D segment and plans on hiring about 500 people.  Some of the employees of the modems division might be retained.

The world's largest networks company said that the modem market has shrunk and demand for thin modems has relatively decreased. In order to boost demand, the sector would need more research and development and that is exactly why the company is drifting toward that segment. It also hopes on increasing focus on its radio networks.

"We have concluded the first phase of the modems strategy by successfully delivering the Ericsson M7450 modem. However, given the modem market dynamics and the development in small cells and indoor coverage markets, we believe resource re-allocation is more beneficial for the Ericsson Group and our customers overall," Hans Vestberg, President and CEO of Ericsson said in the statement.

The strategic changes will go into effect only from the fourth quarter of 2014 and Segment Modems will continue separately until then.

The decision to shut the modems division comes just after Ericsson announced its $95 million acquisition of Fabrix Systems, a firm that sells cloud-based platform to deliver videos on demand. Simply put, Ericsson wants to make TV available anywhere and everywhere, reports Computer World.