Ericsson finally has a plan – flog media and cloud hardware units, double-down on services and IoT
http://telecoms.com/480877/ericsson-finally-has-a-plan-flog-media-and-cloud-hardware-units-double-down-on-services-and-iot/
Having spent the first quarter of the year reviewing the state of his company, Ericsson CEO Börje Ekholm has now unveiled his grand plan to turn the super-tanker around.
The Vestberg era was defined by a drive to diversify away from the core network hardware business, which has been in slow decline for Ericsson. The areas of diversification were generally illustrated in one of Vestberg’s favourite slides below.
Ekholm has decided Ericsson got carried away with its efforts to diversify and spread itself too thin. Not only have a lot of those new areas of business failed to deliver the required growth or profitability after several years of trying, they also have the potential to distract the rest of Ericsson such that it stops even doing its core networks stuff well.
The sensible solution, and generally the most common one when corporations reach the kind of moment of truth Ericsson has, is to jettison the stuff that’s furthest away from your core competency, reinvest in what’s left, and review new business priorities. In the case of Ericsson this looks like a disposal of the media and cloud hardware business, a refocus on networking services and betting on IoT as the main source of long-term growth.
“For some time Ericsson has been challenged on both technology and market leadership and the group strategy has not yielded expected returns,” said Ekholm. “In our strategy review we have listened carefully to customers around the world and made an in-depth analysis of our portfolio and performance. To enable us to immediately take action and move with speed in execution we are today outlining our path to restoring profitability and to lead with innovation and best in class solutions in areas we have decided to focus on.”
Ekholm didn’t specifically say he wanted to offload the media and cloud hardware businesses, but he did say Ericsson was ‘exploring strategy opportunities’ for those units, which is generally accepted as a euphemism for flogging them. Furthermore the recent change in Ericsson’s reporting structure always looked designed to facilitate this process and anyone connected to those units has been removed from the executive leadership team.
