Ericsson CEO: Acquisition-Fueled Firm Faces Challenges

Broadening its portfolio of products and services beyond building base stations for wireless operators has presented daunting challenges for global networking giant Ericsson as it reels in a few big-time acquisitions.

In an interview with xchange online, Ericsson President and CEO Carl-Henric Svanberg admitted his company has had limited success selling managed services to U.S. operators. He said the company is banking on its services unit for continued strong growth and believes its latest of three business units multimedia is poised for success with IPTV deployments.

Svanberg said Ericssons services unit was its fastest growing business last year, driven by non-U.S. operators interest in having it run their wireless networks under managed services deals.

Weve had a great deal of interest in managed services around the world, but much less from the U.S., said Svanberg, who added that its customers see this as a means to let them free up precious resources to create new services. I dont see the level of interest changing until [U.S. operators] see what we have done elsewhere.

Though he sees opportunity for managed services in the United States, this creates a delicate sales situation for Ericsson. Were not going to push that selling because they still see running their networks as their core business, said Svanberg. Once they decide what their core business is, the ball will start rolling very fast.

He said the Sweden-based company is well prepared to act quickly on opportunities in the North America, as it already has 1,500 workers from the services unit here, as well as an extensive network of partners.

Another business challenge facing Ericsson is how to expand its target market beyond traditional telcos and wireless operators, to include satellite operators, cable companies and even broadcasters as the competition intensifies in the U.S. wireless market.

Svanberg said acquisitions such as its pending $1.2 billion deal for Tandberg Television and previous acquisitions of Redback Networks and Entrisphere will help open doors, especially for providers delivering video services.

Those deals, Ericsson execs maintain, will equip the company with a near end-to-end IPTV solution, although it will continue to partner with other vendors to address small parts of the TV ecosystem.

The evolution of its multimedia business unit will help drive sales of its services unit, according to Svanberg. Systems integration services will be the most crucial to our multimedia solution as the area lacks the defined standards and interfaces that a group like 3GPP has done for wireless, he said.

When it comes to integration services, Svanberg said, more and more operators worldwide are opting to go with one provider a trend he believes will extend to carrier multimedia initiatives.

While Svanberg took a never-say-never stance when asked about the possibility of additional acquisitions, he believes those the company has made are likely the last of the big-name deals.

Our strategy has always been to focus on organic growth, Svanberg explained. Weve never been a big acquirer of companies, but now were more of an organic-growth-with-bolt-on acquisitions company.

Ericsson executives said all of the acquired companies are being handled differently, perhaps to avoid a repeat of earlier difficulties with Marconi last year, but did not elaborate.

Weve been through a rough integration with Marconi, admitted Svanberg, adding that Ericsson sought the firm for its optical transmission systems business.


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