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Agenda

Agenda. Company Overview Sweden’s Economic Environment Ericsson’s Performance and Future Shift to Services Sony-Ericsson Joint Venture. Company Overview. Started as a telegraph repair shop in 1876 Now – leading provider of wireless telecom infrastructure equipment

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Agenda

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  1. Agenda • Company Overview • Sweden’s Economic Environment • Ericsson’s Performance and Future • Shift to Services • Sony-Ericsson Joint Venture

  2. Company Overview • Started as a telegraph repair shop in 1876 • Now – leading provider of wireless telecom infrastructure equipment • Present in over 140 countries worldwide • Supplier to 19 out of 20 biggest service providers

  3. Worldwide Presence

  4. Swedish Economic Conditions • Credible, rule-based policy supported growth of 4% per annum (1998-2000) • Riksbank’s inflation targeting regime; sound medium term fiscal framework • Growth driven primarily by technology sector • Sweden feels worldwide recession in 2001 • Telecom exports fell by one-third • A weak Krona helped mitigate export slowdown • Swedish economy exceeded Riksbank inflation target of 2%

  5. Swedish Economic Environment Today • Krona has appreciated significantly • 30% against the Dollar • 20% against the Euro • Domestic demand has increased • Increased consumer confidence • Domestic stabilization • Strengthening world economy

  6. Elements of Poor Performance • Recession • Large economies suffering economic slowdown resulted in slowdown in telecommunications demand • Ericsson’s customers ceased expansionary plans • Profits and sales have been dramatically decreasing since 2001 due to the slowing sales at the consumer level • Saturated Industry • Main markets (US, Europe) have become saturated, ex. Houston, Atlanta have reached saturation levels of 74% • Sales have been replacement phones rather then new contracts  slow growth  providers purchase less network equipment

  7. Stemming the Tide • Massive restructuring effort adopted to combat poor performance • Massive layoffs • Streamlining of R&D operations to cut costs

  8. 3G: Ericsson’s Hope • Ericsson’s strategy assumes consumers will be quick to embrace new technologies • 3G is the new wireless standard • Allows for high-speed voice, data and multi-media communications • Worldwide 3G subscriptions expected to increase to 350 million by 2008

  9. 3G: Almost There • Major 3G rollout was delayed until 3rd quarter, 2003 • Consistent negative cash flows and limited demand contributed to this delay • Successful SEK29 billion stock issue improved companies financial position • Reduced debt to equity ratio

  10. Shifting to Services • Ericsson is making a shirt towards providing services • Global Services Division becoming an ever-increasing part of Ericsson’s business • Three major service areas: • Advisory Services • Integration Services • Managed and Support Services • Global Services Division accounted for 30% of revenue in early 2003

  11. Advisory Services • Offered to insure that customers have the best technology and implementation strategies • Services include: • Business Consulting • Network Consulting • Competence Consulting • Often comes bundled with technology purchases • Service providers rely on Ericsson’s know-how and industry expertise

  12. Integration Services • Provide design, implementation, and integration strategies of telecom networks and IS/IT systems • Services include: • Network Build and Migration • Service Network Integration • Integration of service provisioning, service assurance and revenue management

  13. Managed and Support Services • Total management solutions for service providers • Benefits include: • Managed operations • System and hardware support • Total management and operational control given to Ericsson • Allows providers to focus on other core aspects

  14. Sony Ericsson Joint Venture • 50/50 joint venture began in 2001 • Ericsson wants to capitalize on Sony’s strengths in consumer electronics, design, retail, and digital content • Sony sees advantages in Ericsson’s networking expertise and operator relationships

  15. Sony Ericsson Joint Venture (Cont.) • Venture was slow to see a profit for the first two years • Economic troubles and high capital outlays contributed to poor performance • Venture’s recent performance has greatly improved • Improved operating results and strong increase in sales so far in 2003 • Profit expected to be reached in 4th Quarter 2003 or early 2004 • Long term venture that can endure early hardships

  16. Further Research • Effects of not adopting the EMU • Swedish socio-political environment • Latest facts and figures

  17. Sources • Multiple Ericsson annual reports • Swedish Riksbank • IMF Online

  18. Q&A • Questions??

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