News
Swedish kit maker reorganises into six major divisions, makes sweeping changes to leadership team.
Ericsson on Thursday announced a major restructuring in a bid to inject new growth into the company and to help it compete more effectively against Huawei and a reinvigorated Nokia.
"We are not satisfied with our overall growth and profitability development over past years," said Ericsson CEO Hans Vestberg, in a statement. "We are today announcing further actions to accelerate strategy execution and to drive efficiency and growth across the company even harder."
The Swedish kit maker has created five new business units, two of which comprise its network products and services respectively, and another two that comprise its IT and cloud products and services respectively. The fifth will house Ericsson’s media business.
The company has also created a division called Customer Group Industry and Society, which addresses various verticals including utilities, transport and public safety.
"We will create a leaner, more fit for purpose organisation, to cater to the needs of different customer segments and to faster capture market opportunities. As 5G, the Internet of Things, and cloud drive the next phase of industry development, the time is just right to make these changes," Vestberg said.
The new structure will be effective as of 1 July, and is designed to help Ericsson compete more aggressively with the likes of China’s Huawei, which continues to report rampant growth across all of its operations, and Nokia, which has scaled up dramatically thanks to its acquisition of Alcatel-Lucent.
In line with its reorganisation, Ericsson has also made several changes to its executive leadership team (ELT).
Arun Bansal, currently head of Business Unit Radio, has been appointed senior vice president and head of the newly-created Business Unit Network Products, which sells Ericsson’s radio and transport network kit. Fredrik Jejdling, who at the moment leads the company’s operations in sub-Saharan Africa, will become head of Business Unit Network Services, focusing on network rollout and management services, and customer support.
Ericsson’s head of cloud and IP, Anders Lindblad, has been appointed head of its new Business Unit IT and Cloud Products, while Jean-Philippe Poirault, who currently serves as head of consulting and systems integration, will lead Business Unit IT and Cloud Services.
Meanwhile, Ericsson’s new Business Unit Media will be led by Per Borgklint, who has also taken on the role of chief innovation officer. He currently serves as head of the company’s BSS division.
Finally, Charlotta Sund, head of Ericsson’s Northern Europe and Central Asia business, will become head of Industry and Society.
Furthermore, some senior executives will take on new roles, while others will leave the company altogether.
Ericsson’s chief information officer Anders Thulin will leave the company as 1 July, and Jan Wäreby, head of sales, will retire as of 30 November. Mats Olsson, head of Ericsson’s Asia-Pacific business, is also leaving.
"As we move into a new phase of the company development I want to give a special recognition and thanks to the leaving ELT members. They have been instrumental in building our market leadership and setting us on our current path of change," Vestberg said.
The restructuring was announced on the same day that Ericsson reported its financial results for the first quarter.
Revenue in the three months to 31 March dipped 2% year-on-year to 52.2 billion kronor (€5.71 billion). Sales at Ericsson’s networks division fell to SEK25.8 billion from SEK26.4 billion in Q1 2015, while its services unit saw sales fall 4% year-on-year to SEK23 billion. Ericsson’s support solutions business grew revenue to SEK3.4 billion from SEK3.1 billion.
Ericsson attributed the decline in network sales to weak economic conditions in emerging markets in the Middle East and Latin America, and the completion of mobile broadband projects in Europe. These weaknesses were slightly offset by higher mobile broadband sales in North America and 4G deployments in China.
Lower network rollout activities in Europe and Latin America were responsible for the decline in services revenue, while higher intellectual property rights (IPR) revenue drove growth at the support solutions business, Ericsson said.
Operating income increased to SEK3.5 billion from SEK2.1 billion on lower costs, but Ericsson’s closely-watched gross margin narrowed to 33.3% from 35.4%. Net income increased to SEK2.1 billion from SEK1.5 billion.
"Gross margin declined despite higher IPR licensing revenues. The main reasons were lower margins in Global Services, a higher share of mobile broadband coverage projects in parts of Asia and lower software sales in IP and core networks," Vestberg said.
Going forward, he said Ericsson’s new structure "will make it easier for our customers to do business with us, whether they are operators, media companies or other industries," he predicted.
