Ericsson (NASDAQ: ERIC) announced a corporate restructuring that includes business units dedicated to the IT and cloud sectors, news that comes alongside a reshuffled management team and relatively sluggish first quarter results.
Specifically, Ericsson said that it will break up its businesses into five new units, two of which will focus on IT and cloud operations. Ericsson's new Business Unit IT & Cloud Products unit will be headed by Anders Lindblad, currently the company's Head of Business Unit Cloud & IP. Ericsson said Lindblad will also join the company's Executive Leadership Team with CEO Hans Vestberg and others.
And Ericsson's new Business Unit IT & Cloud Services unit will be headed by Jean-Philippe Poirault, currently Ericsson's Head of Consulting and Systems Integration. Poirault will also join the Ericsson executive team.
Top executives leaving Ericsson as part of the shakeup include Jan Wäreby, Anders Thulin, Mats H. Olsson, and Angel Ruiz, currently head of Ericsson's North America region. Ruiz will be replaced by Rima Qureshi as head of Ericsson's North American region. Qureshi is currently Ericsson's SVP and Head of Group Function Strategy and Head of M&A.
"We are not satisfied with our overall growth and profitability development over past years," Ericsson's Vestberg explained of the moves. "We are today announcing further actions to accelerate strategy execution and to drive efficiency and growth across the company even harder. We will create a leaner, more fit for purpose organization, to cater for the needs of different customer segments and to faster capture market opportunities. As 5G, the Internet of Things, and Cloud drive the next phase of industry development, the time is just right to make these changes."
Ericsson's first quarter net profit rose 49 percent to around $242.6 million, noted the Wall Street Journal, but its gross operating profit margin shrank to 33.3 percent from 35.4 percent in the same period a year earlier. Ericsson blamed the decline on slowing sales in the Middle East, Latin America and Europe, offset by increases in equipment sales in North America and China.
Ericsson's reshuffling comes shortly after the company announced a major teaming with Cisco to sell combined products and services to the telecom market. That teaming was likely in response to the recently consummated merger between Nokia and Alcatel-Lucent, as well as Huawei's continued gains in the market.
However, Wall Street and financial analysts reacted with concern to Ericsson's restructuring. The company's shares fell significantly on the news; and Johan Lagerström, an analyst at Handelsbanken, told the WSJ that "This causes great uncertainty."
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