Telecommunications equipment company Ericsson has taken what could be considered a decisive step towards improving its fortune by finally announcing a new chief executive.
Investors and analysts alike had complained about the lack of a permanent CEO being one of the major stumbling block standing in the way of achieving a major turnaround in the affairs of the company.
Ericsson has only had an interim chief executive since former holder Hans Vestberg was ousted in July as a result of his style of leadership and failure to improve on the company’s deteriorating performance.
The European telecom equipment maker has now moved to resolve its CEO challenge by announcing on Wednesday that long-time board member Borje Ekholm will fill the vacant seat on a permanent basis.
“Having served on Ericsson’s board of directors for the past 10 years, Borje Ekholm has full understanding of the challenges and the opportunities Ericsson currently faces,” Board Chairman Leif Johansson said in a statement.
Johansson noted that the 53-year-old has “a solid understanding of both the technology and business implications of the ongoing convergence of telecoms, IT and media.”
Ekholm, a holder of engineering and business degrees, served as the chief executive of the investment company Investor AB, one of Ericsson’s major shareholders, for about a decade. He is at the moment the CEO of Patricia Industries, an Investor AB subsidiary.
Ericsson has been on a search for new chief executive for a while following Vestberg’s ouster. Some analysts thought the vacant CEO seat has not been helpful to the company in improving on weakening sales amid growing competition.
Following the new CEO announcement, the company’s shares were trading around 3 percent higher Wednesday morning in Stockholm.
The Swedish telecom equipment provider reported a loss in the third quarter of the year last week. Its results were significantly impacted by fall in spending by mobile-service providers on 4G networks.
The company is also facing increasing competition from China’s Huawei Technologies Co. Ltd, which is extending its reach to more countries across the globe. Rivalry is also becoming fiercer from Finland’s Nokia Corp., following its acquisition of fellow telecom equipment supplier Alcatel-Lucent SA.
Ericsson has announced a global restructuring program that is expected to help it reduce annual operating expenses by 10 billion kronor (1.12 billion) in the second half of next year, compared to the level in 2014. About 3,000 of employees in its home country are to lose their jobs as part of the restructuring efforts.
The company expects that the introduction of the next-generation wireless networks (5G) will spark significant improvement in its financial results.
“As the networks and applications become even more important in a 5G connected world, our customers, and the industry, look for continuous innovation,” Ekholm said.
Analysts think massive rollout of 5G networks is unlikely to happen before 2020.
For now, Ericsson will have to make do with cost-cutting measures for several more years to boost profitability. Thousands of job cuts are also still likely.
Acting Chief Executive Jan Frykhammar will remain at the helm of the company until Jan. 16 when Ekholm will take over.