Ericsson CEO resigns after sustained market struggles

Ericsson CEO Hans Vestberg has stepped down with immediate effect, the Swedish vendor has confirmed, as it continues to struggle in challenging market conditions.

After another difficult quarter for the firm, Ericsson Chairman of the Boar Leif Johansson confirmed Vestberg’s departure, citing challenging operating environments and a change in strategic direction as a major contributing factor.

“In the current environment and as the company accelerates its strategic execution, the Board of Directors has decided that the time is right for a new leader to drive the next phase in Ericsson’s development,” he said.

During a press briefing, Johansson suggested the change in strategic direction will focus heavily on IoT as a future channel for Ericsson.

“We will, with Jan [Frykhammar] and a new CEO, develop and refine strategy as it relates to the industry which is now developing with 5G, IoT and Cloud; and to bring back growth and value to Ericsson as we participate in the development of this industry,” he said.

While the search for a successor begins, CFO Jan Frykhammar has been placed in temporary charge. Last week, Frykhammar told Telecoms of the work he and Vestberg were doing to help Ericsson mitigate a challenging 2016, and focus on product diversification going forward.

“…from time to time, you need to reflect on where the industry is at the moment and in that context 2016 is obviously a challenging year for mobile broadband, and therefore we have to take measures and actions. Our focus is for the business to be both strong today and strong tomorrow.”

The diversification away from core telecoms services has been one Vestberg revealed to Telecoms.com in July 2015; as he explained how Ericsson was planning on a shift in strategic direction towards ICT, M2M services and multimedia. Bengt Nordstrom, CEO of analyst firm Northstream, says Ericsson missed out on the booming era for mobile broadband rollout, and suggests Vestberg is paying the price for that.

Are you surprised Vestberg and Ericsson has parted ways?

Total Voters: 87

“If you look back to Ericsson’s performance during Vestberg’s time, it has not been very strong from a market perspective,” he said. “And that has been at a time when mobile broadband has been growing faster than ever, so it is time for them to change CEO and perhaps could have been better if the board had acted sooner rather than later.

“What I think Ericsson has missed out for many years is to fully comprehend where the market is going. Operator revenues are levelling out or decreasing and we’ve covered 90% of the global population with mobile, and in my opinion Ericsson has ignored that is the reality of the industry, so in my opinion it should have drastically reduced the cost base for its core business much earlier. The second thing, which I appreciate is difficult, is to explore new revenue streams. Back in the late 2000s it was making a big multimedia play and it made a number of investments, but that’s not been a growth area, it has not been a growing revenue stream and they haven’t found the money there.”

Ericsson’s priority moving forward once the new CEO has been found and installed, will be to return to growing its revenues and determining new market opportunities for doing so. While Johansson, Ericsson’s chairman, pointed towards 5G, IoT and Cloud as growth areas; rival Huawei is experiencing sustained positive growth and continues to gain market share over its Northern European rivals, Nokia included. It will no doubt be a priority for Ericsson to make its CEO hunt as brief as possible.