In one year, the share value from Ericsson was divided by 2. A tumble that began when the world learned that the Swedish giant had probably poured bribes to the Islamic State in Iraq.
Ericsson in turmoil?
Ericsson has been going through a difficult period for the past few months. While fourth quarter revenue grew 21% to $8.4 billion, the gross margin rate fell by 43.4% last year. Börje Ekholm, the CEO of Ericsson, even said that he expects the profits generated by the activities related to the communication networks to continue to decline during the year 2023.
The Swedish giant, a direct competitor to Chinese Huawei and Finnish Nokia, has launched a major cost reduction plan in 2022 to deal with this situation. Ericsson has also started to sell some of its peripheral activities. ” As anticipated, growth in market share gains in several markets could not fully offset the reduction in operator capex “says Börje Ekholm.
The European giant is seeing its activity slow down in Europe and the United States. It must be said that the threat of a fine for a corruption case in Iraq is not reassuring. Indeed, Ericsson would have soaked in a dark case of bribery in Iraq. In question, mismanagement of the Iraqi branch of the telecom company, which had refused to leave Mosul despite its conquest by the terrorist group in 2014. This history of corruption in connection with the Islamic State in Iraq is not resolved and ” could end very badly for Ericsson “, according to The echoes.
Finally, Ericsson said last week that board chairman Ronnie Leten, who has been under fire for some months, will be replaced in the next few days. Jan Carlson, a six-year board member and current chairman of Autoliv, a Swedish automotive component maker, will succeed former Electrolux CEO Ronnie Leten. Cevian Capital, Ericsson’s largest European investor, had criticized the board of directors, claiming that the weaknesses in its governance cost shareholders billions of dollars.
