Ericsson (Telefonaktiebolaget L. M. Ericsson) one of the largest Swedish companies, is a leading provider of telecommunication and data communication systems, and related services covering a range of technologies, including especially mobile neworks. Directly and through subsidiaries, it also has a major role in mobile devices and cable TV and IPTV systems.
Founded in 1876 as a telegraph equipment repair shop by Lars Magnus Ericsson, it was incorporated on August 18, 1918. Headquartered in Kista, Stockholm Municipality, since 2003, LM Ericsson is considered part of the so-called "Wireless Valley". Since the mid 1990s, Ericsson's extensive presence in Stockholm helped transform the capital into one of Europe's hubs of information technology (IT) research. Ericsson has offices and operations in more than 150 countries, with more than 20000 staff in Sweden, and significant presences also in, for example, China, the UK, the USA, Finland, Ireland, and Brazil.
In the early 20th century, Ericsson dominated the world market for manual telephone exchanges but was late to introduce automatic equipment. The world's largest ever manual telephone exchange, serving 60,000 lines, was installed by Ericsson in Moscow in 1916. Throughout the 1990s, Ericsson held a 35-40% market share of installed cellular telephone systems. Like most of the telecommunications industry, LM Ericsson suffered heavy losses after the telecommunications crash in the early 2000s, and had to fire tens of thousands of staff worldwide in an attempt to manage the financial situation, returning to profit by the mid 2000s.
In 2001 the handsets division formed of a joint venture with Sony called Sony Ericsson. LM Ericsson is now a major provider of handset cores and an infrastructure supplier for all major wireless technologies. It has played an important global role in modernizing existing copper lines to offer broadband services and has actively grown a new line of business in the professional services area.
On 18 February 2008, it was announced that Aastra Technologies would acquire the enterprise PBX division of Ericsson.
Lars Magnus Ericsson began his association with telephones in his youth as an instrument maker. He worked for a firm which made telegraph equipment for Swedish firm Telegrafverket. In 1876, aged 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 US. 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 company. This inspired him to buy a number of Siemens telephones and analyze the technology further. (Ericsson had 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 as Rikstelefon, 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 high standard of finish and the ornate design which made Ericsson phones of this period so attractive to collectors. 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.
With its reputation established, 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 US.
As Stockholm's telephone network expanded rapidly that year, the company reformed into a telephone manufacturing company. But when Bell bought the biggest telephone network in Stockholm, 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 other Nordic countries.
The high 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 US it held patent 529421 since 1879. A single switchboard could handle up to 10,000 lines. The following year, LM Ericsson and Cedergren toured the US, visiting several telephone exchange stations to gather "inspiration". They found that US 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 Allänna 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 Ericssons's largest non-European market. With mass production techniques now firmly established, the phones were losing some of their ornate finish and decoration.
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. Ericssons eventually sold its US assets. In contrast, sales in Mexico were good and led to further development into South American countries. South Africa and China were also generating significant sales. With his company now multinational, and growing strongly, Lars Ericsson stepped down from the company in 1901.
In a curious oversight, Ericsson ignored the growth of automatic telephony in the US. Instead it concentrated on squeezing the most sales out of manual exchange designs. By 1910, this weakness was becoming seriously apparent, and the company spent the years up to 1920 correcting the situation. Their first dial phone was produced in 1921, although sales of the early automatic switching systems were slow until the equipment had proved itself on the world's markets. Phones of this period were characterised by a simpler design and finish, and many of the early automatic desk phones in Ericsson's catalogues were simply the proven magneto styles with a dial stuck on the front and appropriate changes to the electronics. A concession to style was in the elaborate decals (transfers) that decorated the cases. These phones have been also highly collectable and attractive.
In 1928, Ericsson began its long tradition of "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.
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 large loan for his own company Kreuger & Toll from ITT Corporation (administered by Sosthenes Behn), giving large parts of LM Ericsson as security, and used its assets and name in a series of doubtful international financial dealings that had little to do with telephony.
Financially weakened, 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.
With Kreuger no longer in control, the company's shaky financial position became quickly evident. 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 the probable losses were significant. ITT examined the deal and found that it had been misled quite seriously about the Ericsson's value. It summoned Kreuger to New York City for a conference, but Kreuger had a "breakdown". As word of Kreuger's financial position spread, pressure was put on him by the banking institutions to provide security for his loans. ITT cancelled 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 articles of association stating that no foreign investor was allowed to control more than 20% of the votes.
There were a number of negotiations between the major telephone companies aimed at dividing up the world between them, but the sheer size of the ITT empire made it hard to compete with. With its financial problems, Ericsson was forced to reduce its involvement in telephone operating companies and go back to what it did best, manufacturing telephones and switchgear. It could do this easily now, thanks to its overseas manufacturing facilities and its associated supply companies. These had not been involved in the previous shady financial dealings and were generally in a sound position. The Beeston factory in Britain became a very useful asset here. It 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 a large amount of product 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. Ericsson equipment maintained its reputation for quality.
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 full 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 moulded thermoplastic phones (Bakelite, etc).
In 2000, the bursting of the information technology bubble had 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 2000, Intel Corp., the world's largest chip manufacturer, signed a $1.5 billion deal to supply flash memory to LM Ericsson over the next three years.
In 2001 Telecommunications companies around the world experienced a year of tumbling stock prices and huge job losses. By September the stock market valuation of the world's telecom carriers and suppliers had declined by $3.8 trillion from a peak of $6.3 trillion in March 2000. More than a quarter of a million jobs were lost globally in the second quarter of 2001 alone. The major equipment manufacturers — Motorola (US), Lucent Technologies (US), and Cisco Systems (US), 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. Some of the biggest losses were announced by the Canadian supplier Nortel Networks Ltd., which shed 50% of its workforce (almost 50,000 jobs), while in France equipment manufacturer Alcatel cut 33,000 jobs (almost a third of its employees).
Financially, 2002 was even worse for the global Internet and telecommunications industry than the previous year had been due the excesses of the investment bubbles. LM Ericsson, Royal KPN NV, Vodafone Group PLC, and Deutsche Telekom AG experienced the biggest losses in corporate history. The telecommunications sector's problems brought bankruptcies and job losses, and led to changes in the leadership of a number of major companies. The most high-profile victim in 2002 was Ericsson, then the world's largest producer of wireless telecom systems, as it was forced to let go thousands of staff and raise about $3 billion from its shareholders.
In October 2005, LM Ericsson acquired the bulk of the troubled British telecoms manufacturer Marconi, including the Marconi brand name, which dates back to the creation of the original Marconi Company by the "father of radio" Guglielmo Marconi. In September 2006, LM 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, is 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 November 2006, LM Ericsson purchased the UIQ software business for smartphones from Symbian.
In January 2007, LM Ericsson completed the merger of its indirect wholly owned subsidiary, Maxwell Acquisition Corporation, with and into Redback Networks Inc. (Redback), with Redback surviving the merger as a wholly owned subsidiary of LM Ericsson. In February 2007, LM Ericsson acquired Entrisphere, a company providing fiber access technology, based in the United States. In September 2007, LM Ericsson acquired an 84% interest in German software firm, LHS Inc., a stake since raised to 87.5%.
Major competitors today include, in the main business, Alcatel-Lucent, Huawei, Nokia Siemens Networks, and Nortel, with Cisco, IBM, EDS, Accenture, Nokia, Motorola, Samsung, LG Electronics, NEC, Sharp and most recently Apple Inc, competing with aspects of the business (for more details, see the last template at the end of the page).
In addition, there is a very substantial research and development element, and a range of central functions. Operations locally are coordinated through a structure of regions and Market Units, with some Global and Multi-Country Accounts for large customers.
Other elements of the radio access networks are the controllers for radio base stations and radio access network, which manage the traffic between the radio base stations and core networks. In 2G, base station controllers in conjunction with mobile switching centers, effect call handovers between radio base stations as subscribers move between cell sites while engaged in a voice call or data transmission. Similarly, in 3G networks, a radio network controller effects call handover in conjunction with mobility server nodes within the service layer.
The core network nodes interconnect radio access networks with other parts of the network. Many of the core network switching systems, controllers for base stations and radio networks are built upon common platforms. Like its radio base station products, LM Ericsson's mobile switching products have scalability and capacity. Mobile network equipment and associated network rollout services account for approximately 74% of its sales.