Competition has pushed down telecom gear prices while global economic weakness has led to slower spending by operators, pressuring vendors in the industry.

In the third quarter, Ericsson's core profit fell 42 percent due to slower orders and a shift in business mix to less profitable contracts. The company said then it would focus on cost cuts.

Announcing the layoff of 1,550 staff in Sweden, out of the 17,768 currently employed, Ericsson said the redundancies were inevitable.

"We must ensure that we can continue to execute on our strategy to maintain our market leadership, invest in R&D and meet our customers' needs," Tomas Qvist, head of human resources at Ericsson said in a statement.

"To secure this we need to focus on reducing cost, driving commercial excellence and operational effectiveness. "

The company stuck to its forecast for total restructuring costs this year of 4 billion crowns ($597 million), a spokeswoman said. Its shares slipped 0.7 percent on the news.

Ericsson is not the only one suffering.

Earlier this month, rival Alcatel-Lucent (ALUA.PA) said it could sell assets to strengthen its balance sheet after posting a second straight quarterly loss.

Nokia Siemens NOKI.UL is cutting a quarter of its staff hoping for 1 billion euros in cost savings by the end of next year while China's ZTE Corp (0763.HK) and Huawei Technologies Co Ltd HWT.UL, the world's second-largest telecom gear maker, are also grappling with weakening sales.

(Reporting by Simon Johnson. Editing by Patrick Lannin)

• A Permanent Economic Emergency