L M Ericsson Telefon AB’s new president Lars Ramquist may have thought he had a lot to live up to when his predecessor Bjorn Svedberg, commenting on 1989 pre-tax profits that more than doubled on sales up a quarter, promised that the best is yet to come (CI No 1,399), but Ramquist has every right to be satisfied with the Swedish telecommunications company’s interim results announced yesterday. Nobody was expecting Ericsson to match the phenomenal growth in profits recorded in 1989, an exceptional year in which all the right investments were made to bring it up to the size needed to survive in telecommunications, and so for the first half of 1990 Ericsson has done well to hold revenue growth at an impressive 26%, with pre-tax profits rising by 43%. The star performers, both in terms of profits and sales, were public telecommunications and radio communications, where the joint venture with General Electric Co on cellular systems and equipment manufacture in the US was responsible for half of the 76% increase in sales to $974m. Public telecommunications, which alone account for around half of Ericsson’s total revenues, continued to grow strongly and will be more marked in markets such as Mexico, Italy and Spain next year. Of Ericsson’s other business areas, the Cable and Networks arm achieved a 27% growth in sales to $580 largely through acquisitions, while business communications revenues dropped to $390 as a result of the sale of the Swedish sales company. The Defence Systems division saw a 12% fall in turnover to $230m despite a large order for radar equipment for the European Fighter Aircraft project. From a geographical perspective, the only major market in which revenues fell was Sweden – despite Ramquist’s comment that this decline was regrettable, he cannot be too worried that sales at home now only account for 13% of the total – the Swedish economy is not exactly Europe’s most robust, and severe structural problems caused by decades of extravagant socialism are beginning to appear – while growth abroad has more than made up for the lost revenues. Partly on the back of that GE deal, the US and Canada saw the most impressive growth rates – now almost equalling sales to Sweden – and sales in Latin America were up by nearly a half. With strong international growth, what does Ramquist see as the major challenge facing Ericsson? For him, the key to continuing this performance is in keeping and attracting personnel and Ericsson is now on a recruitment drive to staff its new development centres in Europe and the US.
