Ericsson Replaces CEO

Just days after predicting a torpid 2003, LM Ericsson (Nasdaq: ERICY) president and CEO Kurt Hellström has announced his retirement (see Ericsson Stumbles Into 2003 and Ericsson Names Svanberg CEO).

Replacing him as chief meatball on April 8 (the company's annual general meeting) is 50-year-old Carl-Henric Svanberg, who hails from lock company Assa Abloy. (Unstrung thought that was a type of sausage.)

Presumably, this makes Svanberg Ericsson's key man [ed: groan…]. The markets certainly seem to think so: The share price of the world's leading supplier of wireless network infrastructure shot up by as much as 16 percent once the news was released this morning.

Svanberg will be the fourth Ericsson CEO in five years, and this will be his first job in the telecom industry, a fact noted by Ericsson chairman Michael Treschow at a press conference this morning. "We are aware that he has no telecom experience and no Ericsson experience, and this is something we have to address. We wanted a long-term solution, so he has the right age profile. In addition, he has a proven track record as the CEO of a public company, and has a technical background."

Yes, in locks.

"And he is interested in technology, and curiosity, which is important at Ericsson." Er, right... Maybe curious to know what Ericsson is still doing in the handset business (see Ericsson Invests Ahead of Itself).

To ensure that departing seat-warmer Hellström didn't feel left out, Treschow noted how "few people understand what Kurt's job has been like, to adjust Ericsson in this industry environment. This has been the biggest [corporate] restructuring of modern times. It is never good timing to be leaving, but this is as good a time as any, though much of the restructuring is ongoing."

It may also be a good time to go when the share price currently stands at less than 5 percent of its all-time high, and the firm has posted a loss for each of the past nine quarters.

So Svanberg will have "cut costs" at the top of his "to do" list on April 8, something analysts say he has been very good at in his current job. The press release announcing Svanberg's appointment notes that he "will keep the same focus as Kurt Hellström, namely to make Ericsson return to profit, cut costs and to strengthen our leading position."

And to help him make the switch from industrial locks to 3G base stations, Svanberg is buying Ericsson B-shares worth 100 million Swedish krona (about US$11.75 million).

The man himself is obviously as pleased as punch, and gave up all the usual platitudes: It was an easy decision to make; Ericsson's a great company; blah blah... But he obviously knows he has his work cut out. "We all know the difficulties Ericsson is facing, but it has gone through difficult times before, and it will come out as a winning company," he gushed at the press conference. That's the spirit!

So is he up to the task? It seems he did great things at A Saveloy [ed: That's Assa Abloy!], where, through a series of more than 40 acquisitions since he became CEO in 1994, he built the firm to be the world leader... in locks. He also helped the share price increase by more than 230 percent.

And what is this "technical experience" that Ericsson's chairman proudly refers to? Well, in addition to locks, he is well versed in alarms. And he has a Master of Science degree from Linköping Institute of Technology in Sweden.

This, apparently, is enough to beat off any competition from within Ericsson. "There was no internal candidate that met the requirements and skill-set that Ericsson's board had set," says company spokeswoman Eva Sparr.

Svanberg does have a good reputation, though. According to Nomura International telecom infrastructure analyst Richard Windsor, he is "highly respected by the market and known to be very good at communicating with investors."

About locks.

Something that Hellström, who will stick around until the end of the year, was not so hot at, it seems. "[He] has always appeared uncomfortable with market communications, where the message has often seemed unclear," states Windsor in a research note. Once Svanberg is at the helm, "market communication should improve dramatically, which will be very positive for sentiment. [This is] positive for Ericsson as some of its difficult past can now be put to bed."

But there's always the chance it will snore heavily.

— Ray Le Maistre, European Editor, Unstrung
lrmobile_whalenc 12/5/2012 | 12:41:03 AM
re: Ericsson Replaces CEO Nice piece. Just what are these folks at LM Ericsson thinking about? Maybe no thinking has happened yet. They pick this nice fella based on age and say his lack of experience will be addressed? Hello!

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