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Ericsson's CEO steps down as sales plumit

The Swedish telecommunications equipment maker Ericsson has decided to remove its chief executive Hans Vestberg at a time when the company is struggling to regain its place as it faces slowing demand and increased competition in its field.

The company announced that Vestberg, who has been its CEO since 2010, will step down immediately and that its current CFO Jan Frykhammar will be taking over as the interim CEO.

In an Ericsson statement, Vestberg declared that as the industry “enters a next phase... it is time for a new CEO to step in and continue the work to ensure Ericsson's industry leadership.” The company's shares went up 2 per cent as a result of the announcement but things will likely still be difficult going forward due to increased competition from Huawei and other new competitors in the field.

Two years ago, Ericsson's sales to telecom carriers were surpassed by Huawei which has been able to provide the same equipment as the Swedish company at much cheaper rates. When Vestberg first became CEO, the Chinese company was relatively unheard though on Monday it reported a 40 per cent rise in first half-year revenue.

The telecoms-equipment market has been shaken up in the past few years not only by new competitors but also by slowing demand. This aided Finland's Nokia in its business which allowed it to acquire Alactel-Lucent earlier this year. Ericsson responded to this move by committing to a deep partnership with Cisco Systems in which it agreed to partner with the company in areas such as research and development.

To turn its business back around, Ericsson has been cutting costs by eliminating jobs. During the first half of 2016, the company dismissed 8,000 of its employees and its latest measures to reduce costs which it announced last week could see even more of its employees being let go.

Vestberg stepping down as CEO may have appeased stockholders but finding a suitable replacement will be key to Ericsson's success going forward.

Image Credit: 360b / Shutterstock

After living and working in South Korea for seven years, Anthony now resides in Houston, Texas where he writes about a variety of technology topics for ITProPortal.