Ericsson
Ericsson is a global leader in delivering ICT solutions and is since 2016 headquartered in Stockholm, Sweden. With customers in over 180 countries almost 40% of the world’s mobile traffic is carried over Ericsson networks. The company, the 2nd largest in Sweden, offers services, software and infrastructure in information and communications technology (ICT) for telecommunications operators, traditional telecommunications and Internet Protocol (IP) networking equipment, mobile and fixed broadband, operations and business support services, cable television, IPTV, video systems and an extensive services operation.
The company has one of the industry’s strongest patent portfolios with a total count of over 39,000 granted patents as of May 2015, including many in wireless communications.
The company is primarily a supplier of global system for mobile communications (GSM) based equipment (Ericsson had 35% market share in the 2G/3G/4G mobile network infrastructure market in 2012), and looks to benefit to the next generation systems as more broadband content is being streamed to mobile devices, prompting network providers to upgrade their networks. GSM is the dominant wireless standard in Europe and most of the world. Sony Ericsson, the company’s 50/50 mobile handset joint venture with Sony, was one of the top-five largest manufacturers of cell phones in the world. It was originally incorporated in 2001 as Sony Ericsson until Sony acquired Ericsson’s share in the venture on February 16th, 2012 and changed name to Sony Mobile Communications, Inc. headquartered in Tokyo, Japan.
Company History
The company was founded in 1876 by Lars Magnus Ericsson. Lars began his association with telephones in his youth as an instrument maker. He worked for a firm that made telegraph equipment for the Swedish government agency Telegrafverket. In 1876, at the age of 30, Lars started a telegraph repair shop with help from his friend Carl Johan Andersson in Stockholm and repaired foreign-made telephones.
In 1878 Ericsson began making and selling his own telephone equipment. His telephones were not technically innovative but he made an agreement to supply telephones and switchboards to Sweden’s first telecommunications operating company, Stockholms Allmänna Telefonaktiebolag.
Also in 1878, local telephone importer Numa Peterson hired Ericsson to adjust some telephones from the Bell Telephone Company. He improved these designs to produce a higher-quality instrument to be used by new telephone companies such as Rikstelefon to provide cheaper service than the Bell Group. Ericsson had no patent or royalty problems because Bell had not patented their inventions in Scandinavia. Ericsson started to manufacture telephones much like those of Siemens and the first product was finished in 1879.
Later on Ericsson became a major supplier of telephone equipment to Scandinavia. Its factory could not keep up with demand and assembly and metal plating were outsourced. Much of its raw materials were imported and Ericsson bought into a number of firms to ensure supplies of these raw materials.
Stockholm’s telephone network expanded that year and the company reformed into a telephone manufacturer. When Bell bought the biggest telephone network in Stockholm, it only allowed its own telephones to be used with it. Ericsson’s equipment was sold mainly to free telephone associations in the Swedish countryside and in other Nordic countries.
In 1884 Anton Avén, a technician at Stockholms Allmänna Telefonaktiebolag, combined the earpiece and the mouthpiece of a standard telephone into a handset. It was used by operators in the exchanges where they needed to have one hand free when talking to customers. Ericsson picked up this invention and incorporated it into Ericsson products.
International expansion
As production grew in the late 1890’s and the Swedish market seemed to be reaching saturation, Ericsson expanded into foreign markets. The UK and Russia were early markets; where factories were later established improve the chances of gaining local contracts and to augment the output of the Swedish factory.
Other countries and colonies were exposed to Ericsson products through the influence of their parent countries. These included Australia and New Zealand, which by the late 1890’s were Ericsson’s largest non-European markets.
Ericsson did not make significant sales into the United States where The Bell Group dominated the market. Ericsson eventually sold its US assets. With his company now multinational, Lars Ericsson stepped down from the company in 1901.
Sales drives resumed after the Great Depression, but the company never achieved the market penetration that it had at the turn of the century. It still produced a range of telephones and switching equipment; the latter was becoming a more important part of its range. The distinctive Ericsson styles became subdued by the increasing use of bakelite telephones starting in the 1930’s.
Wallenberg era begins
Ericsson was saved from bankruptcy and closure with the help of banks including Stockholms Enskilda Bank (now Skandinaviska Enskilda Banken) and other Swedish investment banks controlled by the Wallenberg family and some Swedish government backing. Marcus Wallenberg Jr. negotiated a deal with several Swedish banks to rebuild Ericsson financially. The banks gradually increased their possession of LM Ericsson shares. In 1960, the Wallenberg family arranged to buy all the shares in Ericsson, and has since controlled the company.
Late 1990’s, beginning 2000’s: emergence of the Internet
In the 1990’s, during the emergence of the Internet, Ericsson was regarded as slow to realize its potential and falling behind in the area of IP technology. The growth of GSM, which became a world standard, combined with Ericsson’s other mobile standards, such as D-AMPS and PDC, meant that by the start of 1997, Ericsson had an estimated 40% share of the world’s mobile market, with around 54 million subscribers. There were also around 188 million AXE lines in place or on order in 117 countries. Telecom and chip companies worked in the 1990’s to provide Internet access over mobile telephones. Early versions such as Wireless Application Protocol (WAP) used packet data over the existing GSM network, in a form known as GPRS (General Packet Radio Service), known as 2.5G.
The International Telecommunication Union (ITU) had prepared the specifications for a 3G mobile service that included several technologies. Ericsson pushed hard for the WCDMA (wideband CDMA) form based on the GSM standard and began testing it in 1996. Japanese operator NTT DoCoMo signed deals to partner with Ericsson and Nokia, who came together in 1997 to support WCDMA over rival standards. DoCoMo was the first operator with a live 3G network.
Ericsson was a significant developer of the WCDMA version of GSM, while US-based chip developer Qualcomm promoted the alternative system CDMA2000, building on the popularity of CDMA in the US market. This resulted in a patent infringement lawsuit that was resolved in March 1999 when the two companies agreed to pay each other royalties for the use of their respective technologies and Ericsson purchased Qualcomm’s wireless infrastructure business and some R&D resources.
Once the Qualcomm conflict was settled, Ericsson continued to be involved in mobile Internet. It announced a partnership with Microsoft to combine its web browser and server software with Ericsson’s mobile Internet technologies. The joint venture was dissolved in 2001 in the aftermath of the Internet and telecom crashes.
Ericsson got caught up in the Dot-com bubble of the late 1990’s. The company’s market value increased; its share price peaked at SEK 825 in March 2000, from a low of SEK 20 at the start of the 1990’s.
Ericsson had become a leading player in networks and the production of mobile telephones, sharing top place with Nokia and Motorola during 1997. Services were becoming increasingly important; Ericsson had offered network rollout services for many years, and had operated networks, but at the end of the 1990’s the services operations were integrated into a services unit. Worldwide hype around the potential of the Internet – and for Ericsson in particular the mobile Internet – had inflated industry expectations. Operators in many Westernized countries used much of their capital bidding for 3G licenses, and could not afford the new networks required to use the spectrum they had acquired. The order intake that Ericsson and other telecom vendors had expected, and invested in preparing for, was disappointing, causing job losses and consolidations across the industry.
Ericsson issued a profit warning in March 2001. Over the coming year, sales to operators halved. Mobile telephones became a burden; the company’s telephones unit made a loss of SEK 24 million in 2000. A fire in a Philips chip factory in New Mexico in March 2000 caused severe disruption to Ericsson’s phone production, dealing a coup de grâce to Ericsson’s mobile phone hopes. Mobile phones would be spun off into a joint venture with Sony, Sony Ericsson Mobile Communications, in October 2001. Ericsson launched several rounds of restructuring, refinancing and staff reductions; during 2001, staff numbers fell from 107,000 to 85,000. A further 20,000 went the next year and 11,000 more in 2003. A new rights issue raised SEK 30 billion to keep the company afloat. The company had survived as mobile Internet started growing. With record profits, it was in better shape than many of its competitors.
2003–2016: rebuilding and growing
The emergence of full mobile Internet began a period of growth for the global telecom industry, including Ericsson. After the launch of 3G services during 2003, people started to access the Internet using their telephones.
Ericsson’s position as a supplier of GSM equipment to many major operators and its pioneering role in the emerging 3G standards and associated technology, placed it at the forefront of many of the changes to come. The cutbacks that followed 10 consecutive quarters of losses meant the company could return to profit in Q3 2003 and begin to grow again. After announcing in 2003 that it had returned to growth, new CEO Carl-Henric Svanberg said the company was to concentrate on operational excellence, a wide-ranging push for efficiency and better return on investment that dominated Ericsson’s corporate culture for several years.
During the cutbacks, Ericsson had reduced its CDMA organization. This standard, used largely in North America, Japan and mainland Asia, was a rival to GSM and Ericsson had a global market share of 25%, but the overall volumes were too low so Ericsson wound down its CDMA commitment, ending it completely by 2006. Ericsson started a series of acquisitions to strengthen its position in key technologies and market segments. The first of these was Marconi, a company dating back to the dawn of radio whose assets included a strong portfolio in transmission, fiber optic and fixed network services.
Ericsson was working on ways to improve WCDMA as operators were buying and rolling it out; it was the first generation of 3G access. New advances included IMS (IP Multimedia Subsystem) and the next evolution of WCDMA, called High-Speed Packet Access (HSPA). It was initially deployed in the download version called HSDPA; the technology spread from the first test calls in the US in late 2005 to 59 commercial networks in September 2006. HSPA would provide the world’s first mobile broadband.
On October 26th, Ericsson announced its new CEO. Börje Ekholm has started on January 16th, 2017 and interim CEO Jan Frykhammar stepped down on the following day.
Acquisitions, expansion, consolidation and cooperation
The short-lived joint venture called Ericsson Microsoft Mobile Venture AB, owned 70/30 percent by Ericsson and Microsoft, respectively, ended in October 2001 when Ericsson announced it would absorb the former joint venture and adopt a licensing agreement with Microsoft instead. The same month, Ericsson announced the launch of Sony Ericsson, a joint venture mobile telephone business, together with Sony Corporation. Sony Ericsson remained in operation until February 2012, when Sony bought out Ericsson’s share.
Lower stock prices and job losses affected many telecommunications companies in 2001. The major equipment manufacturers – Motorola (U.S.), Lucent Technologies (U.S.), Cisco Systems (U.S.), Marconi (UK), Siemens AG (Germany), Nokia (Finland), as well as Ericsson – all announced job cuts in their home countries and in subsidiaries around the world. Ericsson’s workforce worldwide fell during 2001 from 107,000 to 85,000.
In the following years Ericsson established joint ventures and purchased various companies and in 2008 Ericsson acquired Tandberg Television, the television technology division of Norwegian company Tandberg.
In February 2009 ST-Ericsson was established as a 50/50 joint venture by Ericsson and STMicroelectronics, Europe largest semiconductor chipmaker, headquartered in Geneva in Switzerland. The merger followed an existing strategic co-operation between Ericsson Mobile Platforms and ST-NXP Wireless. ST-Ericsson was a multinational manufacturer of wireless products and semiconductors, supplying to mobile device manufacturers. It was a fabless (manufacturing was outsourced) company. The Joint Venture was dissolved in August 2013. ST-Ericsson was an attempt to jump-start a semiconductor business in Europe, but the company never made profit since the merge.
In 2012 Ericsson acquired the broadcast-services division of Technicolor, a Media Broadcast Technology Company. Also in 2012 Ericsson completed the acquisition of BelAir Networks a strong Wi-Fi network technology company.
In April 2013 Ericsson purchased the Mediaroom business, world’s most deployed IPTV platform, serving almost 13 million consumer households, from Microsoft in a deal estimated to be worth between 100 million and 234 million USD. The sale of Mediaroom marks the end of another chapter in Microsoft’s ambition to enter the TV space that had been preceded by the WebTV venture. Both Tandberg Television and the Mediaroom operating system were rebranded as MediaFirst.
In May 2014 Ericsson completed the acquisition of Red Bee Media, an International broadcasting and media services company headquartered in London, UK. Red Bee originates from BBC Broadcast Ltd, to complement the company’s previous acquisitions in the Broadcast and Media industry: the broadcast services division of Technicolor, Tandberg Television, Dutch NOS, Sweden TV4, HyC Group, Fabrix Systems and Microsoft Mediaroom.
In 2015 Ericsson acquired Envivio, a global leader in software-based video. Envivio was founded in 2000 and is headquartered in San Francisco, California USA and with offices in Singapore, Beijing, Denver (Colorado) and Rennes in France. The acquisition would strengthen Ericsson’s video compression position.
In June 2017 Ericsson hired Morgan Stanley to explore the sale of its media businesses. In August 2017 the company announced a costs cutting program of 10 billion SEK (1,25 bn USD) per year, as a result of another disappointing quarter in 2017. The Red Bee Media business was kept in-house as an independent subsidiary company, as no suitable buyer was found, but a 51% stake of the remainder of the Media Solution division was sold to private equity firm One Equity Partners, the new company being named MediaKind. The transaction was completed on 31 January 2019.
In October 2019 Ericsson acquired the filter division of Germany based manufacturer Kathrein. With the take over, Ericsson wants to provide its customers a broadened radio system offering, expanding its portfolio of antenna and filter products and gain competence to evolve its radio access products.
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Resources
www.ericsson.com
www.nordic.businessinsider.com edition August 17th, 2017
www.wikipedia.org
www.wikinvest.com
www.stericsson.com
www.st.com
www.engadget.com edition March 18th, 2013
www.broadbandtvnews.com edition April 8th, 2013
www.broadbandtvnews.com edition November 9th, 2017
www.redbeemedia.com
www.broadbandtvnews.com edition January 31st , 2018
www.digitaltveurope.com edition January 31st, 2018
www.mediakind.com
www.tvtechnology.com edition July 11th, 2018