Steady messages at Capital Markets Day in Stockholm
The key to ensuring stability for Ericsson in a constantly changing market is for the company to continue to make the most of its innovative, market-leading products and leadership in services, six members of Ericsson’s leadership team told investors and journalists at Capital Markets Day in Stockholm.
President and CEO Hans Vestberg opened the day. "The industry fundamentals remain strong. We as a company are leveraging more and more on our assets," he said, noting that Ericsson has increased its market share in mobile infrastructure from 32 percent in May 2011 to an estimated 36 percent at present.
Chief Financial Officer Jan Frykhammar told the audience that Ericsson’s outlook hasn’t changed since the leadership team talked about it in May in New York. Having said that, growth rates will vary between 2010 and 2013, and the global economic environment will have an effect on operator spending.
"We have a passion for the installed base," Frykhammar said, citing estimates that the installed base has the potential to more than double initial business volumes during its life cycle – which, for 2G and 3G, is estimated to be 10 or more years.
He advised the audience to think long term when considering industry trends and Ericsson in particular. He identified three major opportunities for Ericsson: mobile data growth; scaling via services; and securing leadership in fourth-generation IP networking.
Head of Networks Johan Wibergh brought a base station with him: the market-leading RBS6201. He started by measuring the speed of the network (it was 7MBps at 7am but decreased to 5MBps during the event), then added various modules to the base station as the audience watched. Within minutes, he had upgraded the unit so that it would be capable of supporting GSM, WCDMA or LTE, before topping it off with the addition of an IP router.
Rima Qureshi, head of CDMA Mobile Systems, reported that the Nortel acquisition has been very successful for Ericsson, contributing to growth in North America and enabling common CDMA to LTE platforms. While onstage, she added a CDMA component to the same base station and discussed how Ericsson is helping customers plan for the decline of CDMA and the transition to LTE, while remaining profitable.
Head of Services Magnus Mandersson said that Ericsson is the undisputed leader in services, with an 11 percent market share. He emphasized that there is a clear focus on extending that leadership by continuously evolving the service-delivery model. There are four aspects to that: building capabilities and competence in the delivery organization; standardizing services; harmonizing tools; and centralizing deliveries. After his presentation, he was asked about the importance of scale and he replied: “Scale is everything.” He added that innovation, competence and cost control are critical components of services leadership.
Per Borgklint made his first appearance before this audience as head of Multimedia. He began with a review of the third quarter, in which Multimedia returned to profit, and explained the business of OSS and BSS. OSS needs to be close to the operator to ensure that it can run an efficient network, he said, while BSS sees to it that consumers get the preferences and data they want. Borgklint said that the portfolio will be developed in three ways: decoupling hardware and software so that software can be run on any kind of hardware; designing software so that it is module-based and therefore more configurable and flexible; and ensuring that all products can be deployed in the cloud environment. The addressable multimedia market is estimated at USD35 billion.
Throughout the day, several mentions were made of the Sony Ericsson joint venture, which is expected to be fully divested to Sony in early 2012. There was no presentation on Sony Ericsson, but Gilles Delfassey, President of the ST-Ericsson joint venture, reviewed the challenging financial situation faced by the latter. An ongoing transition to a new portfolio has, however, shown results. New products accounted for about 55 percent of total sales for ST-Ericsson and Delfassey said everyone in the organization is focused on returning to profitability.
Intellectual property is a hot topic in ICT at present, and this was the subject of Vestberg’s closing presentation.
"We are moving toward the Networked Society, where people will start using the networks in a totally new way, and where everything will be connected," he said. "Any device with cellular connectivity needs to have a license to use Ericsson’s patented technology.
"We have the industry’s strongest IPR portfolio in wireless. We are driving the ecosystem with SEK30 billion in R&D investments, by being a key contributor to standardization, focusing on winning essential patents, and by practicing fair and reasonable licensing. Shared technology will drive growth, so IPR is more important than ever."
Vestberg said Ericsson aims to grow its IPR revenues beyond the SEK4.6 billion net revenue generated in 2010.
Following the executive presentations, analysts and journalists were invited to participate in breakout sessions on four topics: Traffic and Market Data Report; Managed Services Impact; Radio Insights; and 4th Generation IP.
The presentations are available via webcast at www.ericsson.com/press