Ericsson on Wednesday announced the appointment of a new CEO who said he is committed to continued cost cutting and reestablishing profitability.
The company’s new head, Borje Ekholm, will make the move to Ericsson in January from his current position as CEO of Patricia Industries. The latter company is a division of Investor, a prominent Ericsson shareholder.
Jan Frykhammar will remain interim CEO until January 16, 2017, Ericsson said.
Ekholm, who also served on Ericsson’s Board of Directors for the past decade and as CEO of Investor AB from 2005 to 2015, said Wednesday it is clear the company has to “make adjustments to our cost structure” and “establish profitability by supporting the demand that exists for our services.”
Ercisson Board Chairman Leif Johansson said Ekholm has a “solid understanding of both the technology and business implications of the ongoing convergence of telecoms, IT and media,” as well as a clear view of the “challenges and opportunities Ericsson currently faces.”
Though Ekholm said he is “confident” the company can successfully execute a turnaround strategy, it will undoubtedly be an uphill battle.
In its third quarter financial report on Friday, Ericsson posted a 14 percent decline in sales year over year to just 51.1 billion Swedish Krona (around $5.8 billion), as well as a year-over-year drop in its gross margin from 33.9 percent to 28.3 percent. Operating income also plummeted year over year from 5.1 billion Krona ($572 million) to just 300 million Krona (around $33.7 million).
Ericsson cited the continuation of “negative industry trends,” including weaker demand for mobile broadband, for the slide.
Thus far, Ericsson has attempted to combat the declining figures through a series of cost cutting initiatives that included the layoff of some 8,000 employees in the first half of 2016. But in a warning issued earlier this month, Frykhammar said the cost cutting efforts weren’t enough to offset the steep sales decline in the third quarter.
At the time, Frykhammaer said Ericsson would continue and intensify its cost reduction program. With no other definitive plans announced, it looks like Ekholm will continue on that tack.
