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Ericsson

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Ericsson logo
Ericsson logo

Ericsson (Telefonaktiebolaget L. M. Ericsson) is a Swedish telecommunications equipment manufacturer, founded in 1876 as a telegraph equipment repair shop by Lars Magnus Ericsson. In the early 20th century, Ericsson dominated the world market for manual telephone exchanges but was late to introduce automatic equipment. The world's largest ever manual telephone exchange, serving 60,000 lines, was installed by Ericsson in Moscow in 1916. Throughout the 1990s, Ericsson has held a 35-40 percent market share of installed cellular telephone systems.

Headquartered in Stockholm, Sweden, Ericsson is considered to be part of the so-called Wireless Valley.

Like most of the telecommunications equipment industry, Ericsson has suffered heavy losses after the telecommunications crash in the early years of the 2000s. They had to retrenched tens of thousands of staff worldwide in an attempt to staunch the losses.

As of 2004, Ericsson is back as a profitable company. The handsets division has been given a fresh start in the form of a joint venture with Sony called Sony Ericsson. Ericsson is now an infrastructure supplier for all major wireless technologies, continues to break new ground in modernizing exising copper lines to offer broadband services and is actively growing a new line of business in the services area.

History

Ericsson's mechanical repair shop was started together with his friend Carl Johan Andersson. The company was situated at Drottninggatan 15, central Stockholm. In 1878 he was given the task to adjust some telephones from the Bell company by the local importer Numa Peterson. This inspired him to buy a number of Siemens telephones and analyze the telephone equipment further. (It should be noted that Lars Magnus Ericsson had been studying at Siemens during a scholarship trip a few years back.) At the end of the year he started to manufacture telephones of his own, much in the image of the Siemens telephones, and the first product was finished in 1879.

As the telephone network in Stockholm was expanding rapidly that year, the company reformed itself into a telephone manufacturing company. However, when the Bell company bought the biggest telephone network in Stockholm, they would only allow its own telephones to be used with it. Ericsson were for this reason mainly selling their equipment to free telephone associations in the Swedish countryside and in the other Nordic countries.

The high prices of Bell equipment and phone services led Henrik Tore Cedergren to form an independent telephone company in 1883 under the name Stockholms Allmänna Telefonaktiebolag. As Bell would not deliver equipment to competitors, he formed a pact with Ericsson, who were to supply the equipment for his new telephone network. In 1918 the companies were merged into Allmänna Telefonaktiebolaget LM Ericsson.

In 1884 a multiple switchboard manual telephone exchange was more or less copied from a design by C. E. Scribner at Western Electric. As the device (which held US patent 529421 since 1879) was not patented in Sweden, this was perfectly legal. A single switchboard could handle up to 10,000 lines. The following year, LM Ericsson and Cedergren traveled the USA, visiting several telephone exchange stations to gather "inspiration".

In 1884, a technician named Anton Avén at Stockholms Allänna Telefonaktiebolag had combined the earpiece and the mouthpiece of a (by then) standard telephone into a handset. It was used by operators in the exchanges that needed to have one hand free when talking to their customers. This invention was picked up by LM Ericsson and incorporated into Ericsson products, beginning with a telephone named The Dachshund.

In 1925 Karl Fredric Wincrantz took control of the company by acquiring the majority of the shares in the company. The company was also renamed Telefon AB LM Ericsson. At this time, Ivar Kreuger started showing interest in the company, being a major owner of Wincrantz holding companies.

In 1928 Ericsson began its long tradition of "A" and "B" shares, where an "A" share comes with 1000 votes against a "B" share, so he was actually only controlling a lot of "A" shares, giving him control of the company while not actually controlling a majority of the shares. By emitting a lot of "B" shares, much money was fed to the company, while maintaining the status quo of power distribution.

In 1930 a second emission of "B"-shares took place, resulting in Ivar Kreuger taking over the company with a mixture of "A" and "B" shares. He bought these shares with money lent from Ericsson, with securities given in German state bonds. He then took a large loan for his own company Kreuger & Toll from ITT (administered by Sosthenes Behn) giving large parts of Ericsson as securities. When Behn wanted to cancel this deal in 1932, he discovered the fact that there was no money left in the company, just a large claim on the same Kreuger & Toll that he had himself lent money to. Kreuger had effectively bought Ericsson with its own money. At Kreuger's suicide in 1932, ITT owned one third of Ericsson, but were forbidden to exercise this ownership because of a paragraph in the articles of association stating that no foreign investor was allowed to control more than 20% of the votes.

While Ericsson was close to filing for bankruptcy in 1932, this did not happen. Instead Marcus Wallenberg (jr) negotiated a deal with several Swedish banks to rebuild Ericsson financially. One of them, Stockholms enskilda bank (after a later merger part of the present Skandinaviska Enskilda Banken), together with other Swedish investment banks controlled by the Wallenberg family, would then gradually increase its possession of Ericsson "A" shares, with ITT still being the single largest owner. In 1960 the Wallenberg family finally struck a deal with ITT to buy their shares in Ericsson and the company has since then been controlled by the Wallenberg family, i.e. a part of the "Wallenberg sphere".

Notable products

  • AXE telephone exchange
  • Ericofon handset
  • Sony Ericsson t68 -- first Ericsson mobile phone with color display. Small and light, it was probably best phone of its time.

Further reading

  • John Meurling & Richard Jeans (1994) A switch in time: AXE — creating a foundation for the information age. London: Communications Week International. ISBN 0-9524031-1-0.
  • John Meurling & Richard Jeans (1997). The ugly duckling. Stockholm: Ericsson Mobile Communications. ISBN 91-630-5452-3.
  • John Meurling & Richard Jeans (2000). The Ericsson Chronicle: 125 years in telecommunications. Stockholm: Informationsförlaget. ISBN 91-7736-464-3.
  • The Mobile Phone Book: The Invention of the Mobile Telephone Industry. ISBN 09-5240-310-2

See also

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