Perspectives from ISB

The multinational network equipment maker, Ericsson was founded in 1876 by Lars Magnus Ericsson. The Wallenberg family saved the company from bankruptcy in 1960, and has since controlled the company. However history seems to be repeating itself. In recent quarters, the company has been reporting declining revenues. The company is also being investigated by US authorities for possible corruption in its Chinese operations.

 In such troubled times, Sweden’s Wallenberg dynasty has come forward once again and tightened its grip over Ericsson. It has moved a trusted executive and former head of its main investment company, Investor, to lead the embattled network equipment maker. Borje Ekholm, the former CEO of Investor, has been named CEO of Ericsson. With 22 per cent voting rights, Investor is the largest shareholder in Ericsson. This move is seen as the continued commitment of the family towards the company.

 Mr. Ekholm has served on Ericsson’s board since 2006. He inherits the task of turning around Ericsson amid a slump in spending by its phone-carrier customers that’s led to a 44 percent drop in the stock this year, the ouster of former CEO Hans Vestberg and a surprise collapse in sales and profit delivered two weeks ago. Ericsson fell 1.2 percent to 44 kronor at 11:39 a.m. in Stockholm, after gaining as much as 3.5 percent earlier. The share drop gives Ericsson a market value of 147 billion kronor ($16.5 billion).

 Source: Bloomberg, Oct. 26, 2016

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