Ericsson could in fact show growth that nobody had seen before. In 1980, the year before the NMT premiere, SRA had invoiced about SEK 400 million. In 1990, the year before GSM’s launch, the company invoiced about SEK 8 billion. In 2000, Ericsson’s mobile communications division invoiced for SEK 200 billion and accounted for about 80 percent of the group total.
In other words, over 20 years, invoicing for mobile telephony increased 50,000 percent, averaging out at 40 percent for 20 consecutive years. No Swedish company before or since has experienced growth on this scale.
One vital factor behind this success was the determination to invest in research and development through thick and thin.
Uddenfeldt recounts: “Lars Ramqvist and Kurt Hellström became a duo that created a new Ericsson during the 1990s. During his time as CEO of ERA (1988–1989), Ramqvist gained an understanding of the potential GSM offered; as president for the entire group from 1990 onwards, he did not hesitate to invest heavily in research and development in the mobile field.”
During Ramqvist’s 1990–1998 reign as CEO and president, group investment in research and development rose threefold in absolute terms, from SEK 8 billion to SEK 27 billion annually, which in terms of turnover ranged from 15–19 percent. When Ny Teknik collected statistics on R&D investments in the major Swedish companies in 1993, they showed that Ericsson was well in front, followed by two pharmaceutical companies, Astra and Pharmacia, at No.2 and No.3.
The early parallel investments in GSM, TDMA and JDC were crucial to this success. During the 1990s ERA maintained a global market share in mobile systems of 40 percent or more. In the statistics for 1996, ERA was larger than No.2 (Motorola) and No.3 (Lucent) combined.
THREE SYSTEMS AT THE SAME TIME
It was not easy early on to sell the major research investments to the analysts, Uddenfeldt says. “They would ring and ask how we could cope with developing three digital mobile systems at the same time. Well, I said, and then I went on to talk about cutbacks in military technology, transfers from ETX [the company for fixed telephony] and new recruitments. Not that I think they were convinced but the truth is that we were very successful with all three standards.”
He also remembers one capital market event in 1991, in the midst of an economic downturn and when Ericsson’s figures were not very encouraging. He recalls how Ramqvist “went on about the investment in R&D and took a real drubbing from the analysts. Lars was quick and he was clear, never afraid to take what was going and not always so concerned about being politically correct. This was both good and bad, and a lot of people have their opinions about Lars, but you cannot close your eyes to his determination when it came to investing in development.”
Author: Svenolof Karlsson & Anders Lugn