Ericsson reflects on a tough year, resolves to do better

Ericsson held its 2016 investor day after an exceptionally difficult year for the company and did its best to remain optimistic.

Interim CEO Jan Frykhammar had the unenviable task of reviewing the year, which has seen the company consistently underperform and the consequent departure of its CEO. Summarising the 2016 business environment Frykhammar lamented weak operator investment levels, especially in Ericsson’s core business of mobile broadband.

The latest Ericsson strategy diagram looks suspiciously like the same one we’ve been seeing for years. The key zone is the middle one, which identifies the areas Ericsson is prioritizing for diversification away from its declining core segments. The company seems to like the current position of the Industry and Society group, which is essentially IoT focused, but the IT and Cloud segment remains very much a work in progress.

“We are forcefully executing our strategy to drive incremental profit improvements through greater efficiency, monetizing our installed base in Networks and building new revenue base in IT & Cloud and Media,” said Frykhammar. “Current focus is on speed, efficiency and fine tuning of strategy execution.”

This next slide shows how Ericsson sees the telecoms industry playing out over the foreseeable future and where Ericsson’s various businesses fit into that.

And this slide shows approximate market sizing and growth potential for Ericsson’s main concerns, where it’s hoping ICT convergence will drive growth in its strategic areas.

Lastly Ericsson insisted the strategic partnership with Cisco is going well, despite a conspicuous lack of major announcements since the partnership was formed a year ago.

It’s hard to argue with cloud, media and IoT as strategic priorities but Ericsson is hardly the only company to have joined those dots. The new, streamlined version of Ericsson might have to focus on winning in a smaller number of areas first if it wants to kick-start its turnaround.