Ericsson Rises Amid Report That Controlling Owners Want New CEOBy
Vestberg pressured by slumping share after 6 years on job
Swedish company has pledged to accelerate cost reductions
Shares in Ericsson AB rose after a media report that the mobile network maker’s two most powerful shareholders have agreed the company needs a new chief executive officer to replace Hans Vestberg.
The stock rose as much as 2.3 percent and traded 2.1 percent higher at 62.10 kronor as of 10 a.m. in Stockholm. That followed a drop of 5.6 percent on Tuesday when Ericsson posted second-quarter sales that missed estimates. Vestberg pledged to accelerate cost cuts by trimming research and development spending as the company waits for wireless carriers to resume spending on new networks.
Asked about his future at the company on Tuesday, 51-year-old Vestberg said his focus was “still just on delivering the latest round of savings to rightsize Ericsson, while investing in fifth-generation mobile technology and the Internet of things.”
Investor AB and Industrivaerden AB, which together control more than 40 percent of the voters in Ericsson, now agree the company needs a new CEO, Dagens Industri reported, citing people it didn’t identify. The timing of change is highly uncertain, the newspaper reported, and finding a suitable replacement willing to take the job is proving difficult.
Representatives for Investor and Industrivaerden couldn’t be reached, while a spokesman for Ericsson said the company doesn’t comment on speculation.
Investors have voiced concern over Ericsson’s disappointing share performance after Vestberg’s more than six years as CEO. He’s also faced questions on probes into the company’s allegedly corrupt sales practices in the past in Asia and Europe, while boosting the pace of his cost cuts to placate shareholders. Amid cut-throat competition from Huawei Technologies Co. and Nokia Oyj, Ericsson cut about 4,000 employees last quarter.
In May, Industrivaerden, Ericsson’s second-biggest shareholder, was unusually candid in its critique of the mobile-network manufacturer, saying the stock had underperformed in the face of market changes. Through vote-heavy A shares, Industrivaerden and its associate Svenska Handelsbanken AB control more than 42 percent of the votes in Ericsson together with Investor AB, the holding company of Sweden’s Wallenberg family.
Analysts at Bernstein led by Pierre Ferragu said on Wednesday they continue to expect earnings forecasts to be lowered for Ericsson with “material risks” of a worsening outlook on several fronts.
“Major changes are required at Ericsson, and only a crisis would trigger these changes,” they wrote in a note to clients. “The right time to buy will be deep into said crisis, with management change acting as the possible catalyst.”
With much of the so-called fourth-generation networks already built in the U.S. and China, Vestberg is focusing on cost cuts, but the stock has lost more than 45 percent since reaching a more than seven-year high in April last year.
Vestberg, a career Ericsson manager who joined the company straight out of business school in 1991, headed its global service division from 2003 to 2007 after having held various positions for the company in China, Sweden, Chile and Brazil. He was named chief financial officer in October of 2007 and replaced Carl-Henric Svanberg as CEO at the start of 2010.