Telefonaktiebolaget LM Ericsson (NASDAQ:ERIC) CEO, Hans Vestberg, has been ousted out of office following investigations and a drop in revenue and profit. Vestberg stepped down after being CEO for six and a half years. He did so immediately and the company is currently looking for a replacement. The company stated in the current environment and with the company executing its strategy, the board of directors saw it fit for a new leader to head the company towards this new phase.
Dealing with losses and competition
Ericsson is definitely facing hard times ahead. They have to do a tremendous balancing act of dealing with competition from Nokia Oyj and Huawei Technologies Co. there is also the issue of cutting jobs. The company has disclosed that they will be increasing cost cuts. This should not come as a surprise following four consecutive quarters of losses.
Vestberg’s departure brings about many questions about his tenure with allegations of corruption in Europe and Asia. There were also reports in Swedish media saying that the company might have inflated their sales. This was done possibly having revenues booked prior to invoicing clients. According to the news the company might have inflated the sales figures to 5.9%. During Vestberg’s tenure the shares went down by 4% even though he had promised to improve the company’s profitability.
Board decision and challenges
According to Leif Johansson, the Ericsson chairman, the board’s decision was unanimous. Johansson added that they had been having the discussion in the past weeks so when it came to voting, no surprise was expected. Vesterberg started business units that were to deal with enterprise and media markets and hence invested in 5G wireless technology. He did not make major moves like Nokia.
Ericsson is facing the same challenges that were seen with the Alcatel Lucent and Nokia merger.
Vestberg joined Ericsson in 1991 after business school. From 2003 to 2007 he was head of the company’s global division. This was after serving in different capacities in China, Chile, Brazil and Sweden. He then became CEO in October 2007.
