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Ericsson Nominates Ronnie Leten as New Chairman

Iain Morris

Ericsson has nominated Ronnie Leten as its new chairman following the July decision by Leif Johansson not to seek re-election under apparent pressure from shareholders.

Leten is currently the chairman of Swedish consumer electronics business Electrolux and was previously the CEO of an industrial equipment company called Atlas Copco.

The nomination comes after Johansson earlier this year said he would not seek re-election but instead let Ericsson's owners "jointly propose" a different chairman.

Those comments seemed to reflect a change in Ericsson's shareholder structure earlier this year and subsequent friction between an activist investor called Cevian and Sweden's Wallenberg family, which has previously been regarded as the power behind the throne at Ericsson.

Cevian acquired a 5.6% stake in Ericsson AB (Nasdaq: ERIC) in May and has complained about the influence the Wallenberg family is able to exert with a relatively small stake in the business.

A Wallenberg-controlled investment vehicle called AB Investor owns 5.9% of the share capital but has 21.8% of votes. Another Wallenberg-backed firm called Industrivarden has a 2.6% stake but 15.1% of votes, giving the Wallenbergs 36.9% of total votes.

Signs of growing tension between shareholders have come while Ericsson struggles to execute a turnaround following one of the blackest periods in the company's history.

Amid a downturn in network equipment markets and relentless competition from China's Huawei Technologies Co. Ltd. and Finland's Nokia Corp. (NYSE: NOK), Ericsson has reported a sequence of earnings setbacks and reported a net loss of 1 billion Swedish kronor ($120 million) in the recent April-to-June quarter, compared with a profit of SEK1.6 billion ($200 million) a year earlier.

Current CEO Börje Ekholm, an acolyte of the Wallenbergs who took charge of Ericsson at the start of this year, is determined to restore profitability at the company. An immediate goal is to boost the company's operating margin to about 12% from a lacklustre 6.7% in 2016.

To realise that goal, Ericsson has announced plans to cut annual operating costs by SEK10 billion ($1.23 billion) by mid-2018 and is currently slashing jobs throughout Europe. According to previous reports, it is looking to reduce its headcount by as much as 25,000 employees -- about 23% of the entire workforce. (See Ericsson to Cut 10% of Irish Workforce, Ericsson Plans 25,000 Job Cuts – Report and Ericsson Seeks Merger in Spain to Cut Costs – Report.)

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Leten has previously enjoyed success in senior leadership roles and has also worked for companies targeting the digitalization of their operations -- a task that has become critically important for Ericsson.

In a statement, Johan Forsell, the chairman of Ericsson's nomination committee and the current CEO of Investor AB, said: "Ronnie Leten has a very strong track record when it comes to value creation. Mr Leten is a very skilled businessman, technically savvy and strategically versatile. Furthermore, he has significant experience from digitalization of major operations, which will be beneficial for Ericsson's focused work together with its customers."

Ericsson's shares were trading up 1.2% in Stockholm at the time of publication.

— Iain Morris, News Editor, Light Reading

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