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Ericsson Names New CEOEricsson Names New CEO

Current CFO steps up to the top job as Carl-Henric Svanberg accepts the chairman role at oil giant BP

June 25, 2009

4 Min Read
Ericsson Names New CEO

Ericsson AB (Nasdaq: ERIC) CEO Carl-Henric Svanberg is stepping down to become chairman of oil giant BP. He leaves at the end of the year and will be replaced by current Ericsson CFO Hans Vestberg.

Svanberg, who will retain a position on the Ericsson board after he leaves, joined Ericsson in April 2003 when the company was in dire financial straits and the market was in the doldrums. Some market watchers even suggested the company could go out of business around that time. (See Ericsson Stumbles Into 2003, Ericsson Names Svanberg CEO, and Ericsson: Market Still Waning.)

But during his six-year tenure Ericsson has been transformed from a mobile-focused vendor suffering significant losses, into a multi-faceted (mobile, fixed, video) systems and services player that is now one of the most resilient and profitable of the major specialist telecom infrastructure vendors.

Its 2008 revenues were greater than those of its main rivals -- Alcatel-Lucent (NYSE: ALU), Huawei Technologies Co. Ltd. , and Nokia Networks -- and its financial performance has, apart from the occasional hiccup and the recent performance of its device joint venture, remained stable, despite the current global economic crisis. (See Huawei Closes In on Rivals, Ericsson Holds Up in Q1, Sony Ericsson Issues Profit Warning, Ericsson Soars on Strong Q4, Outlook, Ericsson: Mobile Sector Is Resilient, and Profit Warning Slams Ericsson .)

Others haven't fared quite so well. (See Hard Times for Alcatel-Lucent, Nokia's Cellphone Hope, AlcaLu Ends 2008 With €5.2B Loss, and Nokia Siemens Dips in Q4.)

The transformation process has included a number of major (and a few minor) acquisitions that have given Ericsson market positions and R&D capabilities in optical transport, IP routing, fixed access (including GPON), video infrastructure, and telecom software. (See Ericsson Invests in IPTV Smarts, Ericsson Snaps Up SDP Firm, Ericsson Buys Billing Vendor LHS, Ericsson Buys Openwave Rival, Ericsson Offers $1.4B for Tandberg TV, Ericsson: Tandberg Is Key to IPTV, Ericsson Buys Entrisphere, IPTV Drives Ericsson to Redback, and Ericsson Buys Bulk of Marconi.)

And there's even talk that Ericsson might expand its technology portfolio further with a visit to the Nortel closeout sale. (See Who's Waving Their Wad at Nortel’s MEN?)

In addition, Ericsson recently formed a new mobile platform and chipset joint venture, ST-Ericsson . (See Ericsson Joins Mobile Chip Challenger.)

As a result of that sustained period of M&A activity, Ericsson can now challenge its peers in just about every key telecom technology sector, including, of course, next-generation wireless. (See Ericsson Thinks Green for Routers, Core Network Challenges LTE Vendors, CTIA 2009: Ericsson Shows Off LTE Prototypes, Ericsson: We Can Do 500 Mbit/s Over VDSL2, MWC 2009: Ericsson Booth Tour, MWC 2009: HSPA Rules for Ericsson, Ericsson Makes Packet-Optical Play, Ericsson Takes On IPTV Giants, GPON Gets a 10G Look, Ericsson: Ready to Ramp GPON, and Vendors Scrap Over Managed Services Deals.)

Now Vestberg, aged 44 (but he looks quite a bit younger), is charged with taking the company into the next decade and will fill the hot seat from January 1, 2010.

Vestberg has been with the Swedish vendor since he graduated with a degree in business administration from the University of Uppsala in 1991. During his time at the company he has held management roles in: Brazil and Chile (spending eight years in Latin America in total); China; the U.S.; and Sweden. He has been the controller of the vendor's business in the Americas and headed up the Global Services unit.

He became CFO in 2007 following the resignation of his predecessor, Karl-Henrik Sundstrom, who had failed to predict a shocking third-quarter shortfall that sliced 30 percent from Ericsson's valuation. (See Ericsson CFO Steps Down.)

So is Vestberg just a numbers man, with a main focus on the balance sheet rather than the product portfolio? Answering such questions during a press conference in Stockholm Thursday morning, Vestberg stressed his varied background and said there wouldn't be any change to the corporate culture.

"Technology leadership is the foundation of this company. R&D and technology is the most important focus for the company. I don't see any change in that. Of course, I would like to spend more, but there always has to be a balance." (See Ericsson Earmarks $25B for R&D.)

He also reiterated Ericsson's commitment to developing markets, particularly Africa, the only continent where he hasn't lived and worked during his time at the Swedish firm. "The focus on Africa will continue to be very high -- it's an important region for us that has been growing for a long time."

Regarding the emerging markets in general, Vestberg noted that the main growth during the past three to four years has been from the developing economies (such as India and China), and "we're looking to develop more new business models for these regions. We will continue to invest in those markets, definitely."

No new CFO has yet been appointed.

Ericsson investors seem sanguine about the development: The vendor's share price is down Thursday morning by 0.8 percent on the Stockholm exchange to 76.10 Swedish Kroner (US$9.58).

— Ray Le Maistre, International News Editor, Light Reading

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