Sweden sits at the cutting edge of technology, but its surrounding region is dragging it down, according to Ericsson’s chief executive. The company’s outgoing CEO, Börje Ekholm, says Europe is the real weak spot, describing the continent as a “shitty neighborhood” as his final quarterly report pushed the stock sharply lower.
Shares in the telecom giant dropped 7 to 8 percent on the Stockholm Stock Exchange after Ericsson posted a quarterly profit that came in slightly below expectations.
Adjusted operating profit fell to SEK 6.5 billion for the second quarter, down from SEK 7.0 billion in the same period a year earlier.
“We are delivering a stable quarter, albeit with slightly declining sales,” Ekholm said in an interview with TT.
Revenues dropped 6 percent to SEK 52.7 billion, with rising costs for computer chips weighing on profitability. Ekholm said price adjustments and tighter cost control are on the way.
He pointed to a difficult environment shaped by component inflation and shifting memory prices, adding that the company aims to manage those pressures through internal measures, cost efficiency and the way it develops products.
Asked whether further staff cuts might be needed, Ekholm said the company operates in a fairly flat market that is not growing much, which requires it to stay cost-effective.
Potential in AI
Despite the sluggish market, Ekholm sees room for growth in artificial intelligence.
He noted that much of the current discussion centers on data centers and semiconductors, but the next stage will involve AI moving into applications and companies using it across their operations. That shift, he said, will call for a different kind of connectivity, leaving Ericsson optimistic about demand for mobile networks.
Ekholm is in his tenth year at the helm and will step down as CEO this autumn, making this his final quarterly report.
He said he is most proud of the company’s employees and its strong financial position, which he believes create opportunities to take the next step.
A challenge for Europe
Ekholm also weighed in on Sweden’s industrial climate.
He said politics calls for humility and that it is easy, and often unfair, to sit back and criticize. Looking locally, he argued, Sweden holds an incredibly strong position with a highly competitive business community overall.
The problem, he said, is not Sweden itself.
He summed it up by repeating that Ericsson’s biggest challenge is being in a “shitty neighborhood,” adding that Europe is not in the same shape at all.