Trouble at Ericsson: Can the CEO Survive July?

July could be a make-or-break month for Ericsson's CEO as consecutive quarters of disappointing results and an ongoing corruption scandal for the Swedish vendor are putting pressure on Hans Vestberg's position at the top, according to sources.

The Stockholm-based vendor is due to report its second-quarter results on July 19. In recent quarters, the company has seen declining revenues, even as -- this year -- the CEO tried to restructure and revamp the 150-year-old company. (See Ericsson Restructures as Sales, Gross Margins Falter in Q1, Ericsson CEO Seeks New Growth Formula and Ericsson Predicts Weak Q4.)

Meanwhile, Ericsson is being probed by US authorities for possible corruption in its Chinese operations, according to Swedish news reports. (See Eurobites: Ericsson at Center of Corruption Probe.)

Light Reading asked Ericsson about the corruption allegations on Thursday. The company sent us this statement on the US inquiry and details about a Greek investigation. Basically, the company isn't saying much beyond this yet.

An Ericsson spokeswoman in New York City also couldn't comment further.

"There's been rumblings for a while now... historically, Ericsson cycles through a CEO every four or five years. They're coming up on four years," says one industry source Light Reading spoke to this week about Vestburg's potential departure.

Ericsson denies that the CEO is under pressure.

Nonetheless, according to two sources within Ericsson, the company's recent strategic alliance with Cisco Systems Inc. (Nasdaq: CSCO) has caused a lot of uncertainty among middle-ranking executives wondering about their jobs. Light Reading has been told that at least two general managers have left recently.

If the second-quarter financials come in below expectations, as they might, that could very well herald a change at the top table at Ericsson.

— Dan Jones, Mobile Editor, Light Reading

DanJones 7/1/2016 | 4:07:03 PM
Chairman? I've heard from 1 source that the chairman, Leif Valdemar Johansson, could be in the same boat, strictly a rumor at this point.
sowen557 7/4/2016 | 3:49:09 AM
Re: Chairman? Meanwhile over in Shenzhen, business continues to roll in. 
[email protected] 7/4/2016 | 7:02:48 AM
Investors will look at the share price... The share price (on Nasdaq) is down 19% this calendar year, having opened the year at $9.49 and currently standing at $7.68.

There is a lot of pressure on Vestberg, for sure (isn't there always?) and if things get to a point where the discussion is held at board level about the top team they will need to ask - is the strategy right? If so, is Vestberg the right person to execute that strategy?

Both difficult questions to answer but the facts right now are that the future of the world's comunications technology will hang around intelligent software running on high quality commodity hardware communicating with 'thing's over fiber and wireless connections, with video comprising the vast majority of traffic running over networks. Tech companies, to make money, will need armies of integration staff if theya re to be profitable. Ericsson has that army (and experience in professional services) as well as a leadership position in wireless, a much stronger position in software and a large video business. THis is not an accident.

Ericsson's board will need to decide which is the bigger risk - to continue with the current team that has undoubtedly adjusted to the changing market in the past few years or to hand the job of advancing Ericsson's position to a new CEO.

Big call....    
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