Ericsson CEO not seeing more capex cuts by wireless network operators

“Ericsson’s business and technology leadership in the telecom industry is a valuable asset to the Silicon Valley. The opening of the company’s 4-building R&D and Office campus in North San Jose’s Innovation Triangle pays tribute to the immense concentration of talent and innovation in the region,” said San Jose Mayor Chuck Reed. “Ericsson will help drive the next stage of growth and contribute to our reputation as the Capital of Silicon Valley. We welcome Ericsson to our community and wish its employees, operators and partnersevery success in their efforts.”

Ericsson’s Silicon Valley campus represents the latest investment by Ericsson in North America, following the company’s announcements that it won a landmark seven year $5B managed services contract for Sprint and its recent bid for Nortel Networks’ CDMA and LTE wireless business. 

At the unveiling of its new Silicon Valley complex in San Jose, CA, Ericsson’s CEO said that cellular carriers (Cellcos) appear to have stopped cutting spending on wireless infrastructure equipment made by Ericsson and other suppliers.  Mr. Svanberg was in San Jose, CA to celebrate the company’s new IP and Broadband business division headquarters.  It is Ericsson’s only product group based outside of its home base in Sweden.

"The whole world is suffering from decline that is bigger than anything we’ve seen," said Carl-Henric Svanberg in an interview at the company’s new Silicon Valley office. Svanberg said "It is not our impression that there is further cutting being made."

"The first thing you do as a company is not to run to your shareholders and ask for more money. The first thing you do is try to arrange normal financing," Svanberg said, arguing that lending conditions had improved from six months ago.

OK, but where do we go from here? Does Svanberg’s comment imply that the Ericsson needs to borrow money to finance it’s wireless network infrastructure buildouts? Many pundits have claimed the bottom of the recession is behind us, but it will take at least two years to see any growth. 

The key issue is that  mobile network operators will have a tough time offering true high quality data services without negatively impacting their very profitable voice services. This is because 3G networks are bandwidth limited, resulting in high volumes of data consuming the bandwidth that would otherwise be used for voice calls.  The result will be data caps and blocking of high bandwidth traffic types by the mobile operators.  What can Ericsson due to change this dynamic?

Ericsson Silicon Valley is claimed to represent the fifth wave of innovation for the Valley — Silicon Valley 5.0* – the convergence of the Internet with Mobile Broadband+. Ericsson’s new campus is aimed at driving research and development in broadband, mobility and IP – the key elements for taking the Internet mobile.

+  This author strongly disagrees with Svanberg’s opinion of Silicon Valley as an innovation hub.  As a 40 year resident of Santa Clara, I believe that innovation has precipitously declined in the past few years and the financial meltdown and venture capital retrenchment has put a further damper on the innovation culture here.  

Ericsson’s Silicon Valley campus is the latest investment by Ericsson in North America, following the company’s announcements that it won a landmark seven year $5B managed services contract for Sprint and its recent bid for Nortel Networks’ CDMA and LTE wireless business.

"If you are a world class engineer in IP, you are here, and if you’re not here, you move here," said Bert Nordberg, the head of Ericsson’s 1,200 employee Silicon Valley business.  Isn’t that a bit self serving?  Does anyone believe that Silicon Valley has a monopoly on IP software engineers?  What about India, Russia, or the Ukraine? 

We wish Ericsson good luck in their Silicon Valley operations and hope they will be more co-operative with the trade press than they have been recently.  Also, we’d like to know more about their initiatives to increase wireless backhaul  capacity as well as topology changes that can improve spectrum efficiency and result in lower cost per bit transferred over mobile networks. 

 FOR FURTHER INFORMATION, PLEASE CONTACT
   Ericsson IP & Broadband
   Phone: +1 408 750 8606

0 thoughts on “Ericsson CEO not seeing more capex cuts by wireless network operators

  1. WiMAX Not Really 4G: Ericsson CTO, Om Malik | Wednesday, August 12, 2009

    http://gigaom.com/2009/08/12/wimax-not-really-4g-ericsson-cto/

    Hakan Eriksson, chief technology officer of Stockholm, Sweden-based telecom equipment giant Ericsson, doesn’t much care for WiMAX. He doesn’t even think of it as a real 4G wireless technology — though to be fair, since the ITU hasn’t actually set the standard yet, there are no real 4G technologies. “They are four years late so they have to call it 4G,” Eriksson said of the telecom standards organization during a conversation with Om Malik earlier today.

    He proceeded to run down the reasons why he feels 4G isn’t a true wireless technology — all while laying the smack down on WiMAX.”There are 400 million people using 3G (HSDPA/WCDMA) technologies today,” he said. “There will be 70 million people using WiMAX in five years.” And by then, of course, Long Term Evolution (LTE), the 4G wireless technology, will be the de facto standard thanks to the patronage of large phone companies such as Verizon, Vodafone and AT&T, Ericsson hopes.

    LTE Everywhere

    As a result of its sheer scale, LTE will always have a price advantage — and such costs savings will be passed onto devices that utilize the technology. Eriksson drew a comparison to India, where GSM-enabled handsets enjoy a price advantage over their CDMA counterparts. “It will be the same for LTE and WiMAX,” he said. “In the end it will be about the economies of scale.”

    LTE, according to Eriksson, is going to have a profound impact on our perception of mobile broadband, noting candidly that most of us in Silicon Valley don’t even enjoy true 3G speeds because our backhaul networks aren’t up to snuff. If we did have more bandwidth, he said, we’d be able to experience the true promise of 3G, which in turn would make us all rethink the possibilities offered by this new mobile broadband platform.

    As Dr. Jan Uddenfeldt, SVP and senior adviser of technology to Ericsson’s CEO, pointed out, LTE will eventually move towards 100 Mbps. At those speeds, wireless broadband will start to compete with wired connections, especially that use DSL technology. According to Ericsson’s estimates we should start to see commercial deployments of the technology sometime next year, By 2012, the company expects LTE to be everywhere.

    Comment: This analyst totally disagrees with the LTE forecast. We think mobile LTE won’t start to pick up critical mass till 2012 and may never be everywhere. We don’t think that 3G will be everywhere either!

  2. Response to: “If you are a world class engineer in IP, you are here, and if you’re not here, you move here,” said Bert Nordberg, the head of Ericsson’s 1,200 employee Silicon Valley business.

    Rebuttal: Internet, telecom and software jobs in Silicon Valley suffered a huge loss from 2001 to 2008, with a bigger job loss in 2009. Cisco, Intel and HP have been laying off engineers this year.
    Then how can there be so many “world class” IP engineers in Silicon Valley and why should they move here? What’s the incentive for IP engineers to come to Silicon Valley if there are no IP engineering jobs available?

    Documentation: A report on Silicon Valley employment by the Bureau of Labor Statistics covers the period from 2001 to 2008 and looks at employment trends in 11 high-tech industries, from chips to the Internet to biotechnology.

    It defines Silicon Valley as the counties of San Francisco, San Mateo, Santa Clara, Alameda, Contra Costa and Santa Cruz, but more than half of all the high-tech jobs are located in Santa Clara County.

    The report documents a stunning shift in the region’s high-tech workforce, as Silicon Valley cements its position as the global headquarters for innovation by bidding up the price of talent while using automation and offshoring to cut clerical and factory work.

    “Silicon Valley has been under enormous pressure to cut payrolls to compete, and anything that can either be sent abroad or done more cheaply by software has substituted for workers,” said UC Berkeley Professor Robert Reich, a former labor secretary.

    Among the report’s key findings:

    — 86,137 high-tech jobs evaporated between 2001 and 2008, leaving the region with 435,826 people employed in the 11 industrial groups;

    — Semiconductors, telecommunications and software were among the eight fields that lost jobs;

    — Internet, data processing/software and telecommunications lost over 17,500 jobs or 26% of 2001 employment for those fields

    Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/08/13/BURK197MCC.DTL#ixzz0O6IZvZCM

    http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/08/13/BURK197MCC.DTL#ixzz0O6IFoSLB

    In addition, many IP software jobs were outsourced to India and other emerging countries where skilled labor costs are much lower than Silicon Valley.

  3. Are the Glory Days Long Gone for I.T.?
    http://www.nytimes.com/2009/08/09/business/09digi.html?_r=1

    Don’t even talk about glory when IT and especially telecom have been in a depression since 2001-2002. In the referenced article, Tom Siebel says IT will grow no faster than the rest of the economy (presumably he means US economy). Telecoms top line growth has been declining for years, so the other IT sectors (computers, storage, software, etc) would have to grow much faster than the overall economy to achieve that.

    Thanks for an excellent article!

  4. Jake,

    Thanks for your astute observation. I tend to agree with you.
    Surprised no one else has commented on Ericsson’s controversial claim of Silicon Valley being a meca for IP engineers.

    Alan Weissberger

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