One of the world’s largest manufacturers of network equipment, Ericsson recently announced the departure of its Chief Executive Officer, Hans Vestberg.
Though Ericsson is one of the largest telecom vendor in the world, it has been losing marketshare to its arch rival, Nokia, which enhanced its portfolio by acquiring Alcatel Lucent and Chinese vendor, Huawei, which has been able to gain ground on the back of cost cutting.
Stockholm-based company missed analyst’s estimates for sales and profits for fourth consecutive quarters last month. The company planned to speed up its cost-cutting plan and reduce operating expenses by nearly $1 billion.
While the company has been focusing on network deployment as its core strategy, the next wave of business is likely to come from 5G, which involves Internet of Things and Machine-to-machine communication. So Ericsson might be forced to reduce its focus on its infrastructure division. In the coming few months, the telecom vendors would also need to review its product portfolio to align it more closely with the market requirement. The company might need to develop IP products, which is were it lacks. Nokia has acquired a number of IP products post its acquisition of Alcatel Lucent. True, Ericsson’s collaboration with Cisco helps it to address IP products market but even so, the company would do well to develop competencies in this area.
Innovation is another area where Ericsson would need to focus. It is critical to develop new revenue streams as the telecom equipment marketsize reduces. Developing expertise in these areas means that Ericsson might need to acquire a company to address this market.
It remains to be seen whether the new CEO would be from within the company or outside but it is important that he/she is able to take control from the very first day. The person should also be well versed with the global ICT and Telecom space. Development of new technologies and business models means that Ericsson has to work on war footing to get its bearings back.