The move from hardware- to software-based networking solutions, along with the fact that our still recovering economy has kept many businesses cautious in terms of new investments, has been a significant one-two punch for traditional telecommunications equipment companies like Ericsson. It is amidst this setting that the networking supplier Ericsson yesterday announced that long-time CEO Hans Vestberg (News - Alert) has left the company as president, CEO and board member.
“Hans Vestberg has led the company for seven years through significant industry and company transformation,” said Chairman of the Board Leif Johansson of Ericsson’s (News - Alert) former leader, who had been with the company for 28 years. “Hans has been instrumental in building strong relationships with key customers around the world and his leadership and energy have been an inspiration to employees and leaders across Ericsson. However, 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.”
Jan Frykhammar (News - Alert), executive vice president and CFO, has been named the interim CEO until a new leader is installed. Frykhammar, who has been with company since 1991, has made it clear that he doesn’t want to take on the CEO role permanently, Johansson said.
Ericsson will be conducting a search for a new leader, and has indicated that it expects to consider candidates both within and outside of its organization.
The company earlier this month reported its second quarter results for 2016. At that time it reported Ericsson sales have decreased by 11 percent year over year, which it attributed in part to the fact that mobile broadband sales continued to decline, especially in markets with weak macro-economic environments; that gross margin declined by 32.3 percent year over year, which it said was mainly due to a larger share of mobile broadband coverage business with lower hardware margins and a higher share of services business; and operating margin decreased to 5.1 percent year over year, which it said was hit by negative revaluation effects of currency hedge contracts and lower gross margin.
Vestberg at that time also outlined Ericsson’s plans to reduce its costs and otherwise adapt to what the company described as “negative industry trends.” He said, “The negative industry trends from the first quarter have intensified impacting demand for mobile broadband, especially in markets with a weak macro-economic environment. We are delivering on ongoing cost reduction activities. However, in light of market development, management has, with the support of the board of directors, initiated significant actions to further reduce cost.”