Ericsson chief ousted in face of fiscal crunch

Swedish telecommunications giant Ericsson has removed its president and CEO and upped from 11,000 to 14,000 the number of jobs it plans to cut in a restructuring effort. The company asked Sven-Christer Nilsson to resign because he did not act quickly enough to implement a restructuring plan in the face of declining revenues.

Swedish telecommunications giant Ericsson has removed its president and chief executive officer and upped from 11,000 to 14,000 the number of jobs it plans to cut in a restructuring effort.

The company asked Sven-Christer Nilsson to resign because he did not act quickly enough to implement a restructuring plan in the face of declining revenues, Lars Ramqvist, former CEO who will resume the position, said in a conference call today. Kurt Hellström, executive vice president of Asia Pacific operations, will be president.

"We want to be the leader in the telecommunications world and our plans and staff are in place," said Ramqvist. "We just need to implement the steps and we need expeditious leadership."

Ericsson's profits plummeted in the first quarter ending March 31, and Ramqvist hinted that there will be continued problems in the second quarter. "There is no possibility of surviving at the level we are on now in the first quarter and second quarters," he said.

Ramqvist refused to discuss figures from the second quarter, ending June 31, which will be released July 23. However, he said he expects the company to show revenue growth in the second half of the year.

On April 22, the company reported that first-quarter earnings fell to $US108 million (905 million kroner), from $215 million (1.806 billion kroner). Sales in the quarter rose 8 percent, to $4.96 billion (41.6 billion kroner).

Ericsson blamed the earnings slump on decreasing margins in its consumer products division, restructuring costs and higher operating expenses. Operating expenses increased 24 percent in the first quarter, partly due to expanded research and development in third-generation mobile systems and Internet Protocol (IP) and data communications. A decrease in sales for wireline and data networking systems offset growth in mobile systems, the company reported.

In March, the company announced 11,000 jobs would be cut as part of its restructuring plan. But Ramqvist today said as many as 14,000 jobs would be eliminated over a two-year period. Ericsson employs more than 100,000 people in 140 countries.

Under Nilsson, the company tried to increase activity in the market for wireless Internet communications. To facilitate that move, Ericsson earlier this year purchased the U.S. router company Torrent Networking Technologies and TouchWave Inc., a provider of enterprise IP-technology systems.

The failure of Ericsson to translate the restructuring plan into positive results was cited as the reason for the ouster of Nilsson, who was appointed president and CEO last March. "We need to make these enterprises work," Hellström said.

Despite the earnings slump, Ericsson remains a strong company, offering quality products for mobile wireless networks, according to one analyst.

"They are not making money right now because they are between the product cycle," said Matt Hoffman, a senior analyst for Dataquest Inc. in Chapel Hill, North Carolina. For example, the company has had trouble bringing out its R30 mobile phone, he said.

Ericsson, in Stockholm, can be reached at +46-8-719-00-00,or at http://ericsson.com/.

(Mary Lisbeth D'Amico, of the IDG News Service Munich Bureau, contributed to this report.)

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