Ericsson plans further R&D investment in Montreal

TORONTO — Ericsson’s Canadian operation will be spared the downsizing that has swept the Swedish cell phone maker’s global divisions, its chief executive pledged at the Communications 2002 conference.

In his keynote Tuesday,

Kurt Hellström said Ericsson’s Montreal-based R&D facility is among the few to escape the chopping block as the company struggles to cut operating expenses. Ericsson, which has had a Canadian presence since 1953, employs approximately 1,600 people in Montreal.

At its peak, Ericsson had about 80 sites around the world devoted to R&D, but in a roundtable discussion prior to his keynote Hellström said the company was reducing these to 30. The Montreal facility — the company’s second largest outside its Swedish headquarters — was originally involved in the development of TDMA (time division multiple access), but now its focus will change.

“”It will become one of the key (R&D) hubs in the future,”” he said. “”They will focus more on CDMA (code division multiple access) than they had before and MMS (multimedia messaging services) development.””

Ericsson continues to pursue a cost-cutting strategy that could see the firm reduce its operating expenses until it reaches a break-even point, said Hellström. Last year, the company also went through a restructuring process that saw the consolidation of five market area units to three, including Europe/Middle East/Africa, the Americas and Asia/Pacific.

Though Hellström said Asia/Pacific represents a major percentage of future growth for companies like Ericsson, he also highlighted global opportunities.

“”Only 17 people out of every 100 people have access to a mobile phone,”” he said. “”I don’t think it will stop there.””

Hellström demonstrated a variety of applications he identified as potential market drivers, including video feed of a newscast (requiring 27 Kbps), a music video (192 Kbps) and a sportscast (220 Kbps) over a cell phone. “”This should be a service in Canada,”” he said as the phone’s display run a clip from a hockey game. “”It certainly is in Sweden.””

As it explores MMS, Ericsson is also trying to overhaul its devices through a joint venture it formed with Sony last year. Ericsson once held about 15 per cent market share in the GSM and CDMA phone market a few years ago but has since seen that fall to about 11 per cent. “”It was very simple,”” Hellström said of the Sony partnership. “”We screwed that market up . . . Ericsson is very good with everything that’s inside the phone. Sony is good at developing the aesthetic in the design.””

Besides its core phone business, Ericsson is also developing a services practice, helping operators with classic network rollouts as well as helping them optimize their networks. Hellström admitted that operators would once have seen Ericsson’s role as a potential conflict of interest, but the same economic slump that has seen Ericsson outsource its manufacturing is forcing them to reevaluate their position. “”Ten years ago there would have been resistance. Now they see it’s not competition,”” he said. “”They still have the subscribers. We just help with the network.””

Communications 2002 wraps up Thursday.

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