& cplSiteName &

Ericsson Denies Ditching the Enterprise Market

Iain Morris
6/27/2017
100%
0%

Ericsson has denied reports that it has "scrapped" its efforts to win new business outside of the telecom operator segment but has confirmed, and clarified, that its enterprise ambitions have been scaled back under its new CEO.

The Swedish vendor clarified its position in comments provided directly to Light Reading following a report from Reuters that stated Ericsson had "ditched" its efforts to pursue customer deals outside the telecom sector as it focuses on restoring profitability at its core business.

Ulf Ewaldssson, the head of the Swedish vendor's digital services division, is said to have told Reuters that Ericsson would "focus on telco clients and networks exclusively for now."

But Ericsson says it has not completely abandoned its enterprise ambitions and that it will attempt to build new enterprise market business opportunities using two key channels: its service provider customer base; and via its partner, Cisco Systems Inc. (Nasdaq: CSCO).

Significantly, this means that Ericsson's nascent Internet of Things (IoT) unit, announced in late March, will attempt to develop sales of its IoT platform and solutions business in collaboration with network operators, and not market its IoT offerings directly to potential non-telco customers or via other enterprise/vertical sector sales channels.

"We will build our IoT business with service providers, addressing industries based on use cases," said a spokesperson for the equipment maker. "We will continue to address clients outside of the telecom industry through our service provider customers."

Ericsson AB (Nasdaq: ERIC) says the strategy to no longer use direct or other sales channels to reach enterprise customers was communicated as part of its revised strategy in late March, though the details of its enterprise go-to-market plans may have been overshadowed by other strategic developments. (See Ericsson Tightens Focus, Warns of $1.7B Q1 Hit.)

The move is in sharp contrast to the strategy of Finnish rival Nokia Corp. (NYSE: NOK), which is busy investing in new sales channels aimed at major enterprise customers, and will certainly have ramifications for targets that Ericsson announced during its Capital Markets Day in November 2014.

Then, the Swedish company (at the time run by former CEO Hans Vestberg) said it planned to generate between 20% and 25% of its total revenues from non-telco customers by 2020, up from about 10% in 2013.

But in its 2016 annual report Ericsson revealed that, two years on from that strategic announcement, revenues from outside the telecom operator sector -- including sales to media companies and income from intellectual property rights (IPR) -- remained static at 10% of total revenues.

That disappointing performance may have convinced new CEO Börje Ekholm, who took charge of Ericsson at the start of this year, to overhaul that enterprise growth strategy. (See Is Ekholm Ericsson's Savior or Seller? and Ericsson Ejects CEO Vestberg.)

In response to questions about revised targets for sales beyond the telecom sector, Ericsson stated only that it is not currently communicating any new figures.

The scaled down, more narrow focus on enterprise sales ties in with Ericsson's plan to double down on its networks business as part of a new turnaround plan and consider "options" for non-core assets including its media and cloud hardware businesses.

Last week, Ericsson was reported to have hired banks to explore a sale of the media business. It also completed the sale of its 300-person power modules business to Asian electronics company Flex. (See Ericsson Moves Closer to Media Business Sale – Report.)

Ericsson has been rocked by a series of earnings setbacks -- with net income tumbling to just 1.9 billion Swedish kronor ($220 million) last year from SEK13.7 billion ($1.6 billion) in 2015 -- amid fierce competition from China's Huawei Technologies Co. Ltd. and a downturn in global equipment markets.

Ekholm is determined to improve profitability by cutting costs and ditching some legacy business activities. (See Ekholm's Vision of Slimmer Ericsson Lacks Detail & Dazzle.)

Yet ratings agency Moody's has downgraded Ericsson to junk status out of concern that its focus on cost cutting leaves it short of a clear strategy for sales growth.

Ericsson's share price currently stands at SEK62.95 on the Stockholm exchange, down by 1.0% today but up 16.9% since the start of the year.


For all the latest news from the wireless networking and services sector, check out our dedicated mobile content channel here on Light Reading.


In deciding to pursue enterprise opportunities through telco customers, Ericsson is taking a very different approach from key rivals Huawei and Nokia, both of which are targeting enterprise customers directly as well as through service provider channels.

Having last year completed a €15.6 billion ($17.6 billion, at today's exchange rate) takeover of Alcatel-Lucent, Nokia believes that expanding into vertical markets "adjacent" to the telecom sector will fuel sales growth over the next five years. (See Nokia to Create Standalone Software Biz, Target New Verticals.)

It reckons those markets are worth about €18 billion ($20.3 billion) in sales and will grow at a compound annual growth rate of 13% over the next five years.

Nokia estimates that its main addressable market is worth €113 billion ($127 billion) but will grow at a CAGR of just 1% over this period and decline by 2.2% this year.

Ericsson has not provided five-year guidance but expects the mobile infrastructure market to shrink by 2% to 6% this year.

Although Nokia is widely perceived to be in a resurgent mode while Ericsson struggles, Bengt Nordström, the CEO of the Northstream market research and consulting group, doubts whether telecom vendors have the wherewithal to address the enterprise sector directly.

"Their sales channels are not geared for the enterprise market," he tells Light Reading. "On a global basis there are probably hundreds of millions of enterprises from small shops to multinational corporations and they all have different needs and that is why sales networks need to be so big."

Nordström also thinks telecom vendors lack the products that many enterprise customers need. "The products they have and sell to operators are not really suitable for a channel strategy -- they need to really develop products for that market," he says.

Nokia earlier this month took the wraps off a new routing platform and network processor that it hopes to sell to web-scale giants such as Amazon.com Inc. (Nasdaq: AMZN) and Google (Nasdaq: GOOG) as well as to its traditional telco customers. (See Nokia Heralds Fastest Network Processor Ever.)

But some analysts have expressed skepticism that it can make inroads into the web-scale market with its proprietary approach, suggesting the latest move is at odds with the current focus on virtualization and white box networking.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

(1)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
danielcawrey
50%
50%
danielcawrey,
User Rank: Light Sabre
6/27/2017 | 11:44:34 PM
Enterprise cachet
I think its a bad move to get out of the enterprise business. 

Unikely Ericsson will do that. Yes, catering to telcos first is probably of importance, but it doesn't mean avoiding enterprise. 
From The Founder
NFV's promises of automation and virtualization are intriguing, but what really excites service providers is the massive amount of money they could save.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
Women in Comms Introduction Videos
AT&T's Tech President Preps Workforce for the Future

7|26|17   |   5:47   |   (2) comments


AT&T is focused on the software-defined network of the future and is reskilling its workforce to get ready too, according to AT&T's President of Technology Development Melissa Arnoldi.
Women in Comms Introduction Videos
Cisco: Mentoring Critical to Attract & Retain Women

7|19|17   |   6:40   |   (1) comment


Liz Centoni, senior vice president and general manager of Cisco's Computing System Product Group, shares why mentoring in all its forms is important for women and what Cisco is doing that's made a difference for women in tech.
LRTV Custom TV
Gigabit LTE With Snapdragon 835

7|12|17   |     |   (1) comment


At an event in Wembley stadium, EE used its live network to demonstrate gigabit LTE using a Sony Xperia XZ Premium smartphone with a Qualcomm Snapdragon 835 chip.
LRTV Custom TV
Implementing Machine Intelligence With Guavus

7|12|17   |     |   (0) comments


Guavus unites big data and machine intelligence, enabling many of the the largest service providers in the world to save money and drive measureable revenue. Learn how applying Machine Intelligence substantially reduces operational costs and in many cases can eliminate subscriber impact, meaning a better subscriber experience and higher NPS.
LRTV Custom TV
Unlocking Customer Experience Insights With Machine Intelligence

7|12|17   |     |   (0) comments


When used to analyze operational data and to drive operational decisions, machine intelligence reduces the number of tasks which require human intervention. Guavus invested in Machine Intelligence early. Learn about the difference between Machine Learning and Machine Intelligence.
Women in Comms Introduction Videos
Verizon VP Talks Network, Career Planning

7|12|17   |   4:49   |   (0) comments


Heidi Hemmer, vice president of Technology, Strategy & Planning at Verizon, shares how bold bets and the future of tech define her career.
Telecom Innovators Video Showcase
Masergy's NFV Journey

7|11|17   |     |   (0) comments


Ray Watson, vice president of global technology at Masergy, discusses the advantages and challenges in entering the still-maturing NFV market for the past three years.
Telecom Innovators Video Showcase
Mavenir on RCS Cloud Platform & Multi-ID

7|10|17   |     |   (0) comments


Guillaume Le Mener, head of marketing and corporate development at Mavenir, discussed RCS and the recent launch of Multi-ID, which supports T-Mobile's DIGITS, the revolutionary new technology that breaks down the limitation of one number per phone and one phone per number.
LRTV Custom TV
ADTRAN Executive Outlines Trends in Next-Generation 10-Gigabit Cable Networks

7|10|17   |     |   (0) comments


Hossam Salib, VP of Cable and Wireless Strategy at ADTRAN, outlines key trends as MSOs begin to deploy next-generation Gigabit and 10-Gigabit cable networks. In the interview, Hossam outlines the advantages of a Fiber Deep architecture, FTTH options including EPON and RFoG, and the importance of SDN and NFV in building next-generation high-bandwidth cable networks.
LRTV Interviews
Global Capacity: Bandwidth Demand Driving Ethernet Growth

7|6|17   |   6:37   |   (0) comments


At Light Reading's Big Communications Event in Austin, Texas, Global Capacity's VP of Marketing Mary Stanhope talks about how the demand for bandwidth is changing the way service providers deliver broadband services.
LRTV Interviews
Colt's Services Chief on Digital Delivery

7|5|17   |   16:12   |   (0) comments


Rogier Bronsgeest, the chief customer experience officer (chief CEO!) at Colt, discusses the way in which the service provider interacts with its customers these days and his aggressive net promoter score (NPS) targets.
Women in Comms Introduction Videos
BT VP: Women Should Fill Security Talent Gap

7|5|17   |   6:00   |   (2) comments


By 2020 there will be six security jobs for every qualified worker, and Kate Kuehn, vice president of Security for BT in the Americas, says BT wants to encourage women to fill the shortage in jobs.
Upcoming Live Events
September 28, 2017, Denver, CO
October 18, 2017, Colorado Convention Center - Denver, CO
November 1, 2017, The Royal Garden Hotel
November 1, 2017, The Montcalm Marble Arch
November 2, 2017, 8 Northumberland Avenue, London, UK
November 30, 2017, The Westin Times Square
All Upcoming Live Events
Infographics
With the mobile ecosystem becoming increasingly vulnerable to security threats, AdaptiveMobile has laid out some of the key considerations for the wireless community.
Hot Topics
BBC Head: We Must Reinvent Broadcasting for a New Generation
Aditya Kishore, Practice Leader, Video Transformation, Telco Transformation, 7/21/2017
NFV, SDN, Big Data – It's All About Automation
Craig Matsumoto, Editor-in-Chief, Light Reading, 7/21/2017
What's a Little Throttling Between Friends?
Mari Silbey, Senior Editor, Cable/Video, 7/24/2017
ZoneTV Programs Television Like Pandora
Mari Silbey, Senior Editor, Cable/Video, 7/25/2017
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
Following a recent board meeting, the New IP Agency (NIA) has a new strategy to help accelerate the adoption of NFV capabilities, explains the Agency's Founder and Secretary, Steve Saunders.
One of the nice bits of my job (other than the teeny tiny salary, obviously) is that I get to pick and choose who I interview for this slot on the Light Reading home ...
Animals with Phones
Live Digital Audio

Playing it safe can only get you so far. Sometimes the biggest bets have the biggest payouts, and that is true in your career as well. For this radio show, Caroline Chan, general manager of the 5G Infrastructure Division of the Network Platform Group at Intel, will share her own personal story of how she successfully took big bets to build a successful career, as well as offer advice on how you can do the same. We’ll cover everything from how to overcome fear and manage risk, how to be prepared for where technology is going in the future and how to structure your career in a way to ensure you keep progressing. Chan, a seasoned telecom veteran and effective risk taker herself, will also leave plenty of time to answer all your questions live on the air.