LM Ericsson Telefon AB history, profile and history video
LM Ericsson Telefon AB provides telecommunications equipment and related services to mobile and fixed network operators globally. The company operates through three segments: Networks, Global Services and Support Solutions. The Networks segment delivers products and solutions for mobile and fixed broadband access, core networks, and transmission. Its offerings include radio access solutions that interconnect with devices, such as mobile phones, notebooks and personal computers, supporting all mobile technologies; fixed access solutions for both fiber and copper, such as GPON and DSL; IP core network solutions, including soft switches for edge- and core routing, IP multimedia subsystem and media gateways; microwave and optical transmission solutions for mobile and fixed networks; and network management tools for supporting operators’ management of existing networks, as well as introduction of new network architectures, technologies and services. This includes tools for configuration, performance monitoring, security management, inventory management and software upgrades. The Global Services segment delivers managed services, consulting and systems integration, customer support and network rollout services. Its offerings include managed services comprising solutions for network design and planning, network operations, field operations and site maintenance and shared solutions, such as hosting of platforms and applications; consulting and systems integration, including technology and operational consulting, integration of multi-vendor equipment, design and integration of new solutions and handling of technology change and transformation programs, learning services and optimization services; around-the-clock support and advice to ensure network uptime and performance; and network rollout services, deploying new networks, and modernizing and expanding existing networks. The Software Solutions segment, which is the former name of Multimedia segment provides applications for operators and develops and delivers software-based solutions for real-time and on-demand TV, consumer and business applications and business support systems for telecom operators. Its offerings include IPTV solutions, video compression, on-demand solutions, content management systems, advertising and interactive TV applications for operators, service providers, advertisers and content providers; enterprise market solutions, such as converged business communication solutions, including Ericsson Business Communication Suite and brokering solutions that facilitate payment and distribution of content; and business support systems, including revenue management, customer care, device management and analytics. The company was founded by Lars Magnus Ericsson in 1876 and is headquartered in Stockholm, Sweden.“
Lars Magnus Ericsson began his association with telephones in his youth as an instrument maker. He worked for a firm which madetelegraph equipment for the Swedish government agency Telegrafverket. In 1876, at the age of 30, he started a telegraph repair shop with help from his friend Carl Johan Andersson. The shop was in central Stockholm (No. 15 on Drottninggatan, the principal shopping street) and repaired foreign-made telephones. In 1878 Ericsson began making and selling his own telephone equipment. His phones were not technically innovative, as most of the inventions had already been made in the United States. In 1878 he made an agreement to supply telephones and switchboards to Sweden’s first telecom operating company, Stockholms Allmänna Telefonaktiebolag.
Also in 1878, local telephone importer Numa Peterson hired Ericsson to adjust some telephones from the Bell Telephone Company. This inspired him to buy a number of Siemens telephones and analyze the technology further. (Ericsson had a scholarship at Siemens a few years earlier.) Through his firm’s repair work for Telegrafverket and Swedish Railways, he was familiar with Bell and Siemens Halske telephones. He improved these designs to produce a higher-quality instrument. These were used by new telephone companies, such asRikstelefon, to provide cheaper service than the Bell Group. He had no patent or royalty problems, as Bell had not patented their inventions in Scandinavia. His training as an instrument maker was reflected in the standard of finish and the ornate design of Ericsson phones of this period. At the end of the year he started to manufacture telephones of his own, much in the image of the Siemens telephones, and the first product was finished in 1879.
Ericsson became a major supplier of telephone equipment to Scandinavia. Because its factory could not keep up with demand, work such as joinery and metal-plating was contracted out. Much of its raw materials were imported, so in the following decades Ericsson bought into a number of firms to ensure supplies of essentials like brass, wire,ebonite, and magnet steel. Much of the walnut used for cabinets was imported from the United States.
As Stockholm’s telephone network expanded that year, the company reformed into a telephone manufacturing company. But when Bell bought the biggest telephone network inStockholm, it only allowed its own telephones to be used with it. So Ericsson’s equipment sold mainly to free telephone associations in the Swedish countryside and in the otherNordic countries.
The prices of Bell equipment and services led Henrik Tore Cedergren to form an independent telephone company in 1883 called Stockholms Allmänna Telefonaktiebolag. As Bell would not deliver equipment to competitors, he formed a pact with Ericsson, which was to supply the equipment for his new telephone network. In 1918 the companies were merged into Allmänna Telefonaktiebolaget LM Ericsson.
In 1884, a multiple-switchboard manual telephone exchange was more or less copied from a design by C. E. Scribner at Western Electric. This was legal, as the device was not patented in Sweden, although in the United States it had held patent 529421 since 1879. A single switchboard could handle up to 10,000 lines. The following year, LM Ericsson and Cedergren toured the United States, visiting several telephone exchange stations to gather “inspiration”. They found that U.S. engineers were well ahead in switchboard design but Ericsson telephones were as good as any available.
In 1884, a technician named Anton Avén at Stockholms Allmänna Telefonaktiebolag had combined the earpiece and the mouthpiece of a (by then) standard telephone into a handset. It was used by operators in the exchanges that needed to have one hand free when talking to their customers. Ericsson picked up this invention and incorporated it into Ericsson products, beginning with a telephone named The Dachshund.
Other countries and colonies were exposed to Ericsson products through the influence of their parent countries. These included Australia and New Zealand, which by the late 1890s were Ericsson’s largest non-European market. With mass production techniques now firmly established, the phones were losing some of their ornate finish and decoration.As production grew in the late 1890s, and the Swedish market seemed to be reaching saturation, Ericsson was able to expand into foreign markets through a number of agents. Britain and Russia were early markets. This eventually led to the establishment of factories in these countries. This was partly to improve chances of gaining local contracts, and partly because the Swedish factory could not keep up supply. In Britain, the National Telephone Company had been supplied with Ericsson equipment for some time and was a major customer. By 1897, Britain was accounting for 28% of Ericsson’s sales. Other Nordic countries had become Ericsson customers as well, spurred by the growth of telephone services in Sweden.
Despite their successes elsewhere, Ericsson did not make significant sales into the United States. The Bell Group and local companies like Kellogg and Automatic Electric had this market tied up. Ericsson eventually sold its U.S. assets. Sales in Mexico led to further development into South American countries. South Africa and China were also generating significant sales. With his company now multinational, Lars Ericsson stepped down from the company in 1901.
World War I, the subsequent Great Depression, and the loss of its Russian assets after the Revolution slowed the company’s development and restricted its sales to countries such as Australia.
In 1928, Ericsson began issuing “A” and “B” shares, where an “A” share has 1000 votes against a “B” share. Wincrantz controlled the company by having only a few “A” shares, not a majority of the shares. By issuing a lot of “B” shares, much more money was fed to the company, while maintaining the status quo of power distribution.The purchase of other related companies put pressure on Ericsson’s finances, and in 1925, Karl Fredric Wincrantz took control of the company by acquiring the majority of the shares. Wincrantz was partly funded by Ivar Kreuger, an international financier. The company was renamed Telefon AB LM Ericsson. At this time, Kreuger started showing interest in the company, being a major owner of Wincrantz holding companies.
In 1930, a second issue of “B”-shares took place, and Kreuger gained majority control of the company with a mixture of “A” and “B” shares. He bought these shares with money lent by LM Ericsson, with security given in German state bonds. He then took a loan for his own company Kreuger & Toll from ITT Corporation (administered by Sosthenes Behn), giving parts of LM Ericsson as security, and used its assets and name in a series of international financial dealings that had little to do with telephony.
Ericsson was now being seen as a take over target by ITT, its main international competitor. In 1931 ITT acquired from Kreuger enough shares to have a majority interest in Ericsson. This news was not made public for some time. There was a government imposed limit on foreign shareholdings in Swedish companies, so for the time being the shares were still listed in Kreuger’s name. Kreuger in return was to gain shares in ITT. He stood to make a profit of $11 million on the deal. When ITT’s Behn wanted to cancel this deal in 1932, he discovered that there was no money left in the company, just a large claim on the same Kreuger & Toll that Kreuger had himself lent money to. Kreuger had effectively bought LM Ericsson with its own money.
Kreuger had been using the company as security for loans, and despite his profits, was unable to repay these loans. Ericsson found that they had invested in some very doubtful share deals, whose losses were deemed significant. ITT examined the deal and found that it had been seriously misled about Ericsson’s value. ITT asked Kreuger to come to New York City for a conference, but Kreuger did not attend. As word of Kreuger’s financial position spread, pressure was put on him by the banking institutions to provide security for his loans. ITT canceled the deal to buy Ericsson shares. Kreuger could not repay the $11 million, and committed suicide in Paris in 1932. ITT owned one third of Ericsson, but was forbidden to exercise this ownership because of a paragraph in the company’s articles of association stating that no foreign investor was allowed to control more than 20% of the votes.
Wallenberg era begins
Market developmentEricsson was saved from bankruptcy and closure with the help of banks and some government backing. Marcus Wallenberg Jr negotiated a deal with several Swedish banks to rebuild Ericsson financially. Some of those were Stockholms Enskilda Bank (which later became the current Skandinaviska Enskilda Banken) and other Swedish investment banks controlled by the Wallenberg family. The banks gradually increased their possession of LM Ericsson “A” shares, with ITT still being the single largest shareholder. In 1960, the Wallenberg family struck a deal with ITT to buy its shares in Ericsson, and has since controlled the company.
Ericsson managed to get almost one third of its sales under the control of its telephone operating companies.In the 1920s and 1930s, the world telephone markets were being organized and stabilized by many governments. The fragmented town-by-town systems which had grown up over the years, serviced by many small private companies, were integrated and offered for lease to a single company. Ericsson managed to obtain some leases, which represented further sales of equipment to the growing networks. The other large telephone companies, of course, had exactly the same goal.
Negotiations between the major telephone companies aimed at dividing up the world between them, but the size of ITT made it hard to compete with. Ericsson reduced its involvement in telephone operating companies and went back to manufacturing telephones and switchgear. The Beeston factory in Britain had been a joint venture between Ericsson and the National Telephone Company. The factory built automatic switching equipment for the BPO under license from Strowger, and exported products to former colonies like South Africa and Australia. The British government divided its equipment contracts between competing manufacturers, but Ericsson’s presence and manufacturing facilities in Britain allowed it to get most of the contracts.
Sales drives resumed after the Great Depression, but the company never achieved the market penetration that it had at the turn of the century. Although it still produced a range of phones, switching equipment was becoming a more important part of its range. The distinctive Ericsson styles soon became subdued by the increasing use of Bakelite telephones starting in the 1930.
Following the advent of football shirt sponsorship during the 1980s, Ericsson sponsored two English football clubs during the 1990s – Brentford andQueen’s Park Rangers.
Ericsson introduced the world’s first fully automatic mobile telephone system, MTA in 1956. It released one of the world’s first handsfree speaker phones in the 1960s. In 1954, it released the Ericofon. Ericsson crossbar switching equipment was used in telephone administrations in many countries, and its influence is still felt in such areas as mobile phones.
Acquisitions, expansion, consolidation and cooperation
Around the start of the 21st century, companies and governments began to push for standards for the emerging mobile internet. In May 2000, the European Commission created the Wireless Strategic Initiative, a consortium of four telecommunications suppliers in Europe – Ericsson, Nokia, Alcatel (France), and Siemens AG (Germany) – to develop and test new prototypes for advanced wireless communications systems. Later that year, the consortium partners invited other companies to join them in a Wireless World Research Forum in 2001.
In 2000, the bursting of the information technology bubble with marked economic implications for Sweden. Ericsson, the world’s largest producer of mobile telecommunications equipment, shed thousands of jobs, as did the country’s once fast-expanding Internet consulting firms and dot-com start-ups. In the same year, Intel, the world’s largest semiconductor chip manufacturer, signed a $1.5 billion deal to supply flash memory to Ericsson over the next three years.
In December 1999 Microsoft and Ericsson announceda strategic partnership to combine the former’s web browser and server software with the latter’s mobile-internet technologies. A short-lived joint venture called Ericsson Microsoft Mobile Venture AB, owned 70/30 percent by Ericsson and Microsoft, respectively, ended in October 2001 when Ericsson announced that it would absorb the former joint venture and adopt a licensing agreement with Microsoft instead.
That same month, Ericsson announced the launch of Sony Ericsson, a joint venture mobile-phone business, together with Sony Corporation. Sony Ericsson remained in operation until February 2012, when Sony bought out Ericsson’s share, Ericsson stating that it wanted to focus on the global wireless market as a whole.
Lower stock prices and job losses affected many telecommunications companies in 2001. The major equipment manufacturers – Motorola (U.S.), Lucent Technologies (U.S.),Cisco Systems (U.S.), Marconi (UK), Siemens AG (Germany), Nokia (Finland), as well as Ericsson – all announced job cuts both in their home countries and in subsidiaries around the world. The number of jobs at Ericsson worldwide fell during 2001 from 107,000 to 85,000.
In September 2001 Ericsson purchased the remaining shares in EHPT from Hewlett Packard. Founded in 1993 Ericsson Hewlett Packard Telecom EHPT was a Joint Venture made up of 60% Ericsson interests and 40% Hewlett-Packard interests.
The pain continued into 2002. Investor losses topped $2 trillion and share prices fell by 95% until August that year. More than half a million people lost their jobs in the global telecom industry over the two years. The collapse of U.S. carrier WorldCom, with more than $107 billion in assets, was the biggest in U.S. history.The sector’s problems brought bankruptcies and job losses, and led to changes in the leadership of a number of major companies. Ericsson made 20,000 more staff redundant and raise about $3 billion from its shareholders.
In June 2002, Infineon Technologies AG (then the sixth-largest semiconductor supplier and a subsidiary of Siemens AG) bought Ericsson’s microelectronics unit for $400 million.
Co-operation with Hewlett-Packard did not end with EHPT and in 2003 Ericsson outsourced its IT to HP, which included Managed Services, Help Desk Support, Data Center Operations, and HP Utility Data Center. The contract was extended in 2008. There have also been a number of joint Ericsson/HP Telecoms outsourcing deals with telecoms operators including H3G and Vodafone.
In October 2005, Ericsson acquired the bulk of the troubled British telecommunications manufacturer, the Marconi Company, including its brand name, which dates back to the creation of the original Marconi Company by the “father of radio” Guglielmo Marconi. In September 2006, Ericsson sold the greater part of its defense business Ericsson Microwave Systems, which mainly produced sensor and radar systems, to Saab AB, which renamed the company to Saab Microwave Systems. The sale meant that Saab Ericsson Space, previously a joint venture, was now fully owned by Saab. Not included in the sale to Saab was the National Security & Public Safety division, which was transferred to Ericsson with the sale.
In 2007, Ericsson acquired carrier edge-router maker Redback Networks, and then Entrisphere, a US-based company providing fiber-access technology. In September 2007, Ericsson acquired an 84% interest in German customer-care and billing software firm LHS, a stake later raised to 100%.
In 2008, Ericsson sold its enterprise PBX division to Aastra Technologies, and acquired Tandberg Television, the television technology division of Norwegian companyTandberg.
In 2009, Ericsson bought the CDMA2000 and LTE business of Nortel’s carrier networks division for USD 1.18 billion; Bizitek, a Turkish business support systems integrator; the Estonian manufacturing operations of electronic manufacturing company Elcoteq; and completed its acquisition of LHS.
Acquisitions in 2010 included assets from the Strategy and Technology Group of inCode, a North American business and consulting-services company; Nortel’s majority shareholding (50% plus one share) in LG-Nortel, a joint venture between LG Electronics and Nortel Networks providing sales, R&D and industrial capacity in South Korea, now known as Ericsson-LG; further Nortel carrier-division assets, relating from Nortel’s GSM business in the United States and Canada; Optimi Corporation, a U.S.–Spanish telecommunications vendor specializing in network optimization and management; and Pride, a consulting and systems-integration company operating in Italy.
In 2011, Ericsson acquired manufacturing and research facilities and staff from the Guangdong Nortel Telecommunication Equipment Company (GDNT) as well as Nortel’s Multiservice Switch business.
It also formed a strategic alliance with Akamai Technologies to develop and market mobile cloud acceleration services.
Ericsson acquired U.S. company Telcordia Technologies in January 2012, operations and business support systems (OSS/BSS) company.In March, Ericsson announced that it was buying the broadcast-services division of Technicolor, a media broadcast technology company.
On July 1, 2013, Ericsson announced it would acquire the media management company Red Bee Media, subject to regulatory approval.The acquisition was completed on May 9, 2014.
In September 2013, Ericsson completed its acquisition of Microsoft’s Mediaroom business and televisions solution, originally announced in April the same year. The acquisition makes Ericsson the largest provider of IPTV and multi-screen solution in the world, by market share. Ericsson Mediaroom.“
*Information from Forbes.com and Wikipedia.org
**Video published on YouTube by “Ericsson“