Ericsson in the New Millennium


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Case Details:

Case Code : BSTR128
Case Length : 13 Pages
Period : 1990 - 2004
Organization : Ericsson
Pub Date : 2004
Teaching Note : Available
Countries : Global
Industry : Telecom

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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EXCERPTS Contd...

The Early 2000s: Restructuring

The Asian financial crisis had a negative effect on companies worldwide. It had paralyzed economies around the world and growth in the telecom sector too slowed down. Sales in the US were especially hard-hit.

The US had been one of Ericsson's strong markets. With falling sales in the US market and failure to compete in the Asian markets, Ericsson was in a lot of trouble. In a statement released in 2001, the company said, "The current economic slowdown, in particular in the US, has increased the uncertainty about the growth rate in the entire information technology sector." In the Asian markets, Ericsson was also facing tough competition from many Asian companies, such as Samsung and LG, that had entered the mobile handset business in a big way, and were in a race to provide them at the lowest prices. Between 1999 and 2000, many European telecom operators interested in expansion had taken enormous loans running into billions to buy licenses and acquire other telecom companies...

Turnaround

By the end of year 2003, Ericsson had finally managed a turnaround in its fortunes. In the first quarter of 2004, Ericsson earned a profit of $390 million (Refer to Exhibit III for Ericsson's performance since 2000).

Exactly a year earlier, for the same period the company had incurred losses to the tune of $566.9 million. This was therefore, an outstanding performance from a company that had been struggling miserably for the last two years. In the first quarter of 2004, Ericsson experienced 9% growth in sales to a level of $3.7 billion, and a major share of this growth was in markets in Mexico, China and Brazil. The major contributor to Ericsson's growth was Ericsson's mobile systems, which contributed $2.77 billion in sales. Services from Ericsson contributed $540 million, while equipment for wireless systems contributed $118 million and other operations of Ericsson provided $316 million. But the real sign of recovery for Ericsson was that by the end of 2003, the company was operating on gross margins of 41.623 %...

Exhibits

Exhibit I: Ericsson's Products and Services
Exhibit II: US Wireless Infrasructure Key Suppliers
Exhibit III: Ericsson's Performance in Early 2000s

 

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