Keeping up with the upstarts: Ericsson's reorganization progresses

While change can be good, it is not necessarily easy. Ericsson has been learning that lesson for quite some time. Just as any large telecommunications company must somehow try to hold onto the agility it had in its youth, those companies also must be able to morph into new shapes to meet current trends and costs.

About a year ago, Ericsson management set out to restructure the Swedish-born company to trim off fat and to help the company function as a leaner and more productive entity. But trimming fat is never pleasant, especially to company employees. In an announcement in January, Ericsson said it would cut about 11,000 of its 104,000-person labor force. But now, that number is projected to leap to approximately 14,000 during the next two years. Technology now involves less labor-intensive equipment, causing the downsizing, company officials said.

"The cuts will happen where jobs become redundant," said Lars Stalberg, senior vice president of communications for Ericsson. "Those cuts may take place because of outsourcing of certain activities or divesting of activities."

Some jobs may simply be moved from one area of the company to another.

"Of course, there are no certainties or guarantees in our industry," Stalberg said. "It is a very rapidly changing environment, and we all have to face the fact that continuous change and continuous adaptations to new technology [are] a fact of life."

Job restructuring has not been limited to technical levels, as evidenced in July when the company ousted its president and CEO Sven-Christer Nilsson after only 15 months at that post. The company cited Nilsson's failure to expedite and speed the restructuring process as cause for his removal. Lars Ramqvist, who was previously CEO of Ericsson from 1990 to March 1998, was brought back to the leadership position.

"[Ramqvist] seems to be more upbeat and able to get things done," said Bryan Prohm, a senior analyst with Dataquest. "The reorganization has been working well, but the problem they have is that people were confused about what was going on and how it was being measured."

Stalberg noted that the company will focus on wireless, while also working to combine wireless with increased efforts in data communications, more specifically, Internet-based technologies.

"Our strength, no doubt, is in the wireless business. We have a clearly leading position for wireless, where we have had our most success and have invested heavily," he said.

Wins such as the recent America Online deal for dense wave division multiplexing equipment put Ericsson on the map for DWDM, said Dana Cooperson, senior analyst at RHK. "It bodes well for the future of [Ericsson's] optical networking products."

DWDM is an integral part of the Ericsson offering, said Roselyne Genin, vice president of optical networking for Ericsson. "We were the first to optically protect for WDM, which gave us significant advantage," Genin said. She emphasized Ericsson's investments in companies such as Juniper Networks and Torrent Networks. "We have a string-of-pearls strategy - we are interested in companies that complement our core business," Genin said.

Stalberg agreed. "Our strategy of acquisitions has been very focused on finding technologies that are complementary to what we are doing on our own and that are not necessarily spectacular in size. We are not looking at major acquisitions just to acquire market share." He also noted that the reorganization process is expected to take about two years but will continue to evolve after that time as well.