Tue, Jul 26, 2016 - Page 10 News List

Ericsson ousts chief executive officer Vestberg

DAMAGING ALLEGATIONS:Hans Vestberg has faced questions on corruption probes in Asia and Europe, and media reports of sales being artificially inflated

Bloomberg

Ericsson AB ousted chief executive officer Hans Vestberg after its shares slumped, competition intensified and the maker of wireless networking equipment faced investigations into its business dealings in Europe and Asia.

Vestberg, who was CEO for six-and-a-half years, stepped down immediately, according to an Ericsson statement yesterday. Chief financial officer Jan Frykhammar is to take over as CEO until a replacement is found.

“In the current environment and as the company accelerates its strategy 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,” the company said.

Vestberg’s departure caps a turbulent period for Ericsson, which is cutting jobs while battling fierce competition from Huawei Technologies Co (華為) and Nokia Oyj. The company said last week it would accelerate cost cuts after reporting disappointing results.

Vestberg has faced questions on probes into alleged corruption in Asia and Europe, and last week the company rejected a report in Swedish media that it might be inflating sales by booking revenue before some clients are invoiced.

Ericsson shares yesterday advanced as much as 5.9 percent on the news. The stock was up 5 percent to 66.55 kronor at 9:28am in Stockhom.

The shares lost about 4 percent during Vestberg’s tenure, compared with a more than 90 percent gain for the STOXX 600 technology index.

With much of the 4G networks already built in the US and China, Vestberg had vowed to improve profitability, but the stock has declined since reaching a more than seven-year high in April last year.

Vestberg had carved out new business units targeting media and enterprise customers to get back to growth, while investing in next generation 5G wireless technology, which represents the next wave of spending at Ericsson’s telecom customers. However, he refrained from big, dramatic moves such as Nokia’s purchase of Alcatel-Lucent SA, opting instead for a partnership with Cisco Systems Inc for Internet products such as routers.

A new CEO could potentially shift the product strategy and be more aggressive about mergers and acquisitions, Kepler Cheuvreux analyst Sebastien Sztabowicz said in a research note.

Nokia and Huawei “have both engaged toward an end-to-end products portfolio strategy,” he said.

Vestberg, a career Ericsson manager who joined the company straight out of business school in 1991, headed its global service division from 2003 to 2007 after having held various company positions in China, Sweden, Chile and Brazil. He was named chief financial officer in October 2007 and replaced Carl-Henric Svanberg as CEO at the start of 2010.

Earlier this year, Ericsson’s second-biggest shareholder, Industrivaerden AB, was unusually candid in its critique of the mobile network manufacturer, saying its shares had underperformed in the face of market changes.

Through vote-heavy A shares, Industrivaerden and its associate, Svenska Handelsbanken AB, control more than 42 percent of the votes in Ericsson together with largest shareholder Investor AB, the holding company of Sweden’s Wallenberg family.

“They needed something to happen,” Swedbank AB analyst Mathias Lundberg said in Stockholm.

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