Swedish telecommunications equipment manufacturer L.M. Ericsson released details of a reorganization plan that signals an increased focus on markets and customers, said the company. The new organization is expected to be fully implemented by Jan. 1.
Lars Stalberg, a spokesman for the company, said no layoffs are expected as a result of the proposed new organizational structure.
Stalberg said the reasons Ericsson reviewed and proposed changes to its organization included changes in its business environment, including deregulation, convergence and globalization as well as a need for a structure that would best support its strategies. The company said it will release further details on its future strategies Oct. 12.
The telecommunications equipment industry has been marked by several upheavals and reorganizations during the past several months.
In June, Motorola Inc. announced a restructuring that included laying off 15,000 worldwide employees and consolidating its manufacturing. In July, the company announced an end to its “warring tribes” system of business with a realignment that combined all of its communications-related businesses into a single organization.
Last month, Northern Telecom Ltd. spelled out plans to lay off 3,500 employees, or about 4 percent of its work force. Published reports indicated the realignment may be part of a move by Nortel to bolster its Internet products focus.
For its part, Ericsson has struggled during the last several months. The company’s stock plunged in August on the news that its mobile phone sales were relatively flat, while its Finnish rival Nokia Corp. got a boost from its mobile phone sales during the quarter. Despite an increase in overall net sales, Ericsson’s Mobile Phones and Terminals division reported only 1-percent growth in sales over second quarter 1997. The company pointed to Asia’s financial crisis as a primary reason for weakening sales.
“Ericsson has been missing in action for almost 12 months,” said Bob Egan, research director with Gartner Group in Stamford, Conn., who noted Nokia’s success has put pressure on Ericsson. “This is Ericsson’s attempt to regain control.”
Egan said the restructuring among equipment manufacturers is a symptom of both an industry that is maturing through first- and second-generation technologies as well as positioning itself for a third generation of opportunities.
Ericsson’s operations will be divided into three business segments: Network Operations, Consumer Products and Enterprise Solutions. Each business segment will be headed by an executive vice president who will be a member of the new Corporate Executive Team and will have consolidated profit and loss responsibility.
Network Operations will include operations for both wireless and fixed solutions for data and telecommunications, said the company. The Mobile Systems Business Area will comprise the major share of the segment’s operations. Infocom Systems Business Area also will be part of the Network Operations segment.
The Consumer Products segment will incorporate all of Ericsson’s mobile phone operations.
The Enterprise Solutions area will focus on solutions for business communication requirements.
The plan also calls for Ericsson to create four new corporate offices to cover Europe, Africa and the Middle East; North America; Latin America; and Asia and Oceania. The corporate office for Europe, Africa and the Middle East will be located in London.
