This unit, which will develop applications and services for carriers and enterprises, will comprise a number of current units, including Multimedia Systems, Enterprise, Mobile Platforms, and the Consumer and Enterprise Lab units, and have about 4,000 on staff. Ericsson has yet to name the head of the new unit.
"Multimedia is the foundation for all the services the operators want to produce," such as IPTV, interactive gaming, and mobile entertainment, said the CEO. "We and the operators have a lot to learn [about] the services people want to use."
The focus on multimedia service development is also self-serving, noted Svanberg, as the uptake of such services is "a powerful driver for increasing network capacity and investments by operators."
The new unit will also "will better leverage our relationships with [mobile handset manufacturer] Sony Ericsson Mobile Communications and Sony Corp. (NYSE: SNE)."
Growth potential in this unit, where the main point of customer contact is the carrier's CMO (chief marketing officer), is "strong," said the CEO. He cited market projections from research firm Analysys that revenues from networked content (music, gaming, TV, radio, etc.) would grow from less than €20 billion (US$25.4 billion) in 2005 to more than €100 billion ($127 billion) in 2011.
The vendor is also hiring 500 new engineers to accelerate development of IP equipment and multimedia applications. That news will stick in the craw of the 1,600 Marconi staff that Ericsson axed, and is still in the process of discarding, following the acquisition of the British vendor late last year. (See Ericsson Buys Bulk of Marconi and Ericsson/Marconi: The Fallout.)
Analysts at Lehman Brothers regard the move as modestly positive for Ericsson. In a research note issued today they wrote: "We believe Ericsson is trying to take advantage of its rivals' M&A activities to boost its customer focus and thus take share and perhaps obtain a pricing premium." They added that "today's announcement perhaps helps highlight Ericsson's client focus to current and prospective customers," but that it "does not really constitute a fundamental change in divisional structure."
News of the reorganization gave Ericsson's share price a lift on the Stockholm exchange today, as it crept up by 0.30 Swedish Kroner, more than 1 percent, to SEK24.90. On the Nasdaq this morning the vendor's stock was up 35 cents to $34.34.
— Ray Le Maistre, International News Editor, Light Reading
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