Ericsson shake-up defended
No. 2 exec says new management will aid return to profitability
08/22/2001
By VIKAS BAJAJ / The Dallas Morning News
Ericsson's incoming chief operating officer said Tuesday that the company's new management structure, announced last week, will hasten its restructuring plans and return to profitability.
Per-Arne Sandström, in a telephone interview, said the shake-up, which propels him to the newly created No. 2 position from head of North American operations, was not a response to heightened competition.
The Swedish wireless company is also consolidating sales divisions and reorganizing product development units.
"The biggest challenge, apart from getting organized and the efficiency program, is to return to a healthy profit margin in the systems area," he said from Stockholm, Sweden.
"That's the biggest challenge here, and that's going to be a big part of my job to make sure that we, in the short term, turn this around."
Ericsson, which has its U.S. headquarters in Plano, said in July that it lost $1.3 billion (17 cents a share) in the second quarter, compared with a profit of $953 million (12 cents a share) for the same period in 2000. Revenue at $5.9 billion was down from $6.1 billion.
The figures are particularly disconcerting, because Ericsson's previously stellar wireless infrastructure business joined the ailing mobile phone business in reporting a loss.
In contrast to its Scandinavian peer, Nokia Oyj, Ericsson makes most of its money by selling network equipment, not cellular phones. But analysts say Nokia may be gaining market share in networks at Ericsson's expense, because the Finnish firm remains profitable overall and can offer better terms to phone companies.
The infrastructure business is hurting because carriers have curtailed equipment spending in an effort to boost their bottom lines, even as they add millions of subscribers in the United States and elsewhere, said Mr. Sandström, who had headed the company in Plano since March 2000.
"There is some overcapacity in the network that's being used now by the operators to postpone or delay investments and clean up the balance sheets," he said.
The situation can't last forever, he said, because limiting investments will erode service and drive customers to competitors.
Mr. Sandström said the telecommunications industry's troubles will continue for at least another year.
"It's a difficult time now, and we have to see this well into 2002 and perhaps even beyond."
He will be replaced at the helm of the North American operations by Angel Ruiz, now executive vice president and general manager based in Atlanta. Mr. Ruiz will report to the company's head of the Americas, Gerhard Weise.
Mr. Sandström, 53, said his experience in dealing with the U.S. economic slowdown will serve him well as he undertakes his new role, where he will oversee product development and other units.
The appointment should also free up Ericsson president and chief executive Kurt Hellström to spend more time with customers, Mr. Sandström said.
"He is looking to me to run all the business units, all the core units and all the spinning of the wheels of the company."
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