According to reports from Bloomberg, the recent reshuffle in the telecommunications equipment industry has squeezed Ericsson's margins and many companies have not survived this wave. In the face of the next drastic change, Borgetkar, the new CEO of Ericsson, said he was ready.
As a board member of Ericsson, Borje Ekholm has witnessed the damage caused by the price wars of Chinese manufacturers. After ten months as CEO of the Swedish wireless network equipment maker, he foresaw another wave of new competitors in the future as the network operations move to software. Borje Ekholm, insisting on investing in R & D to prevent Ericsson's market position from further suffering, is facing pressure to cut further spending of more than SEK 10 billion (about 1.19 billion U.S. dollars).
"There are going to be new entrants to the market in the future, and that's what happens when patterns change," Borje Ekholm said in an interview in London. "Anyway, I will not sacrifice R & D investment because that's how we protect the future."
Borje Ekholm predicts that the next wave of shuffling will occur in the future as mobile networks are increasingly based on software rather than hardware. This so-called virtualization may also bring new competitors, from small start-ups to large tech companies, because entry barriers are lower than for networked devices.
"We should make that assumption," said Borje Ekholm. "If you unfold your imagination, you will find that everyone is doing it
Ericsson is one of the top three vendors left behind by the latest market consolidation. Last year, in the face of fierce competition from Chinese vendors Huawei and ZTE, Nokia of Finland annexed France's Alcatel-Lucent. Borje Ekholm said that the rapid development of Huawei ZTE over the past 15 years has "radically changed the industry." A large number of pioneers in the telecommunications industry, including Siemens Networks, Nortel Networks and Motorola, have dropped out of the market. Now Nokia, Ericsson and Huawei three companies compete for dominance.
In response to increasing competition and operator capitals, Ericsson has expanded its product offerings to try to attract new customers from the broadcast and utility industries. However, Borje Ekholm is now dismissed as part of the strategy and is considering selling the Ericsson media unit to focus on the company's core network business.
Ericsson "needs to change," Borje Ekholm said in taking over the company in January of this year. "We, like the board of directors, try to fight back by entering new realms just as the board of directors does, and it is quite worth our while to try, and we can now say that we have not achieved the desired result.