Telecom network vendor Ericsson on Thursday said it will exit from modems business.
The Stockholm, Sweden-based Ericsson which had net sales of $34.9 billion in 2013, will shift parts of resources in modems to radio network R&D to capture growth opportunities in this area.
Ericsson will utilize an additional 500 R&D resources – some of them from modems business — to focus on radio networks, especially within small cells, energy efficiency and M2M.
Ericsson to cut jobs
Ericsson said it will also eliminate nearly 1,582 employees who will be from main sites including Sweden (689), India (235), Germany (216), China (206) and Finland (122). Ericsson did not share the exact number of employees who will be affected as part of the change in its strategy.
In a statement, Ericsson said that it will discontinue the development of modems.
The change in strategy for modems comes as the company completes its previously communicated evaluation of the future of the modems business.
Hans Vestberg, president and CEO of Ericsson said: “We concluded the first phase of the modems strategy by delivering the Ericsson M7450 modem. However, given the modem market dynamics and the development in small cells and indoor coverage markets, we believe resource re-allocation is more beneficial for the Ericsson Group and our customers overall.”
Why Ericsson is exiting from modem
The elimination of the job across the globe is a result of Ericsson strategy to exit from the joint venture with STMicroelectronics in August 2013.
After the break up from STMicroelectronics, Ericsson took over the LTE thin modem operations and started focusing on bringing devices integrating an Ericsson modem on the market. In August 2014, Ericsson introduced M7450 modem.
Ericsson is not finding significant market for thin modems. Strong competition, price erosion and an accelerating pace of technology innovation and significant R&D investments have forced Ericsson to exit from modems business. For instance, the R&D cost for Modems will be approximately SEK 2.6 b for the full year 2014.
Incidentally, Ericsson made two important announcements related to its modem business this year. In April, Ericsson named Robert Puskaric as senior vice president and head of Business Unit Modems. In May, Ericsson appointed Rima Qureshi as chief strategy officer to look after mergers and LTE thin modem.
Baburajan K
editor@telecomlead.com
