Identyfying growth opportunities at Ericsson Investor Day

Ericsson’s leadership team presented the company’s plans and long-term outlook for growth at the annual Investor Day in Stockholm.

Ericsson holds a clear market leadership position in four of its six business areas: Mobile Networks, Services, Support Solutions, and IPR. In the areas of IP Networks and Platforms (ST-Ericsson), Ericsson is a challenger and President and CEO Hans Vestberg says the goal is to improve its position in all six areas.

Ericsson’s year-to-date sales levels are -1 percent quarter-on-quarter. Vestberg told the audience: "We are not satisfied with our profitability, but we know why we are there. We invested in market share, now we are less aggressive, more selective."

The three forces of mobility, broadband and cloud continue to drive transformation for people, business and society. "In 2017, there will be more than 5 billion mobile broadband users," Vestberg said. "That means three times as many people will have access to the internet." That scale of connectivity allows operators to take one of three roles: a network developer; a service creator; and in between, the service enabler. For any one of these roles, Ericsson will provide the right support and service and technology solutions.

"Every strategic decision we make will be to build on our competitive advantages: technology leadership, service leadership, and global scale," Vestberg said.

Beyond traditional sales to operator customers, Ericsson has selected three other industries where its solutions and services can be used: TV and media, public safety, and utilities. "In 2011, we had 23 deals in this area," Vestberg said. "We still have a majority of deals from operators but a lot is moving into other areas."

CFO Jan Frykhammar explained how Ericsson is in transition, but will remain a hardware provider. "Our profit improvement plan is about increasing software as a share of sales by increasing radio and being successful in 4th generation IP," he said. He detailed the company’s efforts in new business models, profit improvement and capital improvement within Ericsson.

"We will support the implementation of new business models to create more recurring services revenues but also to make sure hardware becomes a differentiator," Frykhammar said. "We must secure payback of the investment on our footprint as well as proactively identify, execute and govern profit improvement. We will continue to invest in the right things to get benefits."

Chief Technology Officer Ulf Ewaldsson offered a view of the world that is already on its way to becoming the Networked Society. "There are 69 million connected smart meters, and soon there will be 11 million connected cars," he said.

“Devices put new demands on networks. And new features have to be put into networks to make them work better – for example in battery saving, or application performance."

Johan Wibergh, head of Business Unit Networks, showed a demonstration of a city with population growth and increased data traffic, and explained how Ericsson can solve capacity and coverage issues.

Most questions from the audience focused on how the current business mix with a higher proportion of coverage projects versus capacity upgrades would develop, and when gross margins would be higher. Vestberg said that Ericsson has a strong foundation upon which to build: "We have the strongest team to address challenges and continue to be No.1 in the industry."

See the press release with new market outlook figures here.