Ericsson announced a corporate restructuring that includes business units dedicated to the IT and cloud sectors, news that comes alongside a reshuffled management team and relatively sluggish first quarter results.
Ericsson CEO Hans Vestberg reiterated that 4G and 5G technologies are key to the vendor's strategy for 2016, but noted that the company needs to begin reaping the rewards of recent investments in fields including software.
Nokia CEO Rajeev Suri said Ericsson and Cisco's partnership to resell each other's products and services and jointly develop new ones means that Nokia was right to purchase rival Alcatel-Lucent for $16.6 billion (€15.6 billion). Nokia also commenced its formal share offer to buy Alcatel-Lucent's outstanding shares and drive the merger toward completion early next year.
Ericsson and Cisco's partnership to resell each other's products and services and jointly develop new ones could generate well more than the $1 billion each in revenue by 2018 that the vendors have projected, according to senior executives at the firms. Meanwhile, John Chambers, Cisco's executive chairman and former CEO, indicated that he thinks Nokia's deal to acquire Alcatel-Lucent is likely to fail, something Nokia dismissed.
Ericsson cut its outlook for how much the network equipment will grow over the next few years, but still said it aimed to grow faster than the market. The company also thinks it will be aided by a new partnership it unveiled yesterday with Cisco to integrate existing gear, combine some sales and consulting efforts potentially jointly develop new hardware and services.
Ericsson CEO Hans Vestberg said he hopes the United States will continue to lead on the development on 5G network technology and build on the lead it had in deploying LTE. However, he said that as a vendor Ericsson needs to be out in front on crafting 5G networks, which he expects to be deployed commercially before official standards are set.
Ericsson reported stronger sales and operating profit than analysts had expected in the second quarter, and the network vendor said that its business in the U.S. market had stabilized during the period.
Ericsson CEO Hans Vestberg scheduled a meeting with senior management to discuss potential large-scale mergers and acquisitions that would help the company to compete against a merged Nokia and Alcatel-Lucent.
Ericsson reported continued weakness in the North American market in the first quarter as carriers continue to hold back on investing heavily in networks as they pay for spectrum licenses and other expenses. The Swedish vendor reported drops in net income and operating profit despite a jump in top-line sales that benefited from currency moves. Meanwhile, Ericsson's licensing revenue took a hit due to an ongoing patent dispute with Apple.
Ericsson CEO Hans Vestberg has seen the company revive itself and transform into a more software-focused vendor. And while Ericsson has been a leading vendor in deploying LTE networks, Vestberg wants to ensure that the company stays ahead of the pack when it comes to rolling out next-generation networks.