Cevian Capital Buys More Than 5% of Telecom Equipment Maker Ericsson

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Activist investor Cevian Capital has bought a more than 5 percent stake in Sweden’s Ericsson and said it sees significant potential in the struggling mobile telecom equipment maker.

Ericsson shares have fallen close to 40 percent in the past two years as the firm has been hit by a drop in spending by telecoms firms – with demand for next-generation 5G technology still years away – and weak emerging markets.

The firm, which reported an operating loss of 12.3 billioncrowns ($1.41 billion) in the first quarter, also faces mountingcompetition from China’s Huawei and Finland’s Nokia.

Borje Ekholm, a Swedish business insider and veteran boardmember, took over as Ericsson’s CEO last October after a seriesof weak years.

“We see a significant potential in the company,” Cevianmanaging partner Christer Gardell told Reuters.

“It’s about hard work ahead. We support the main thrust ofthe plan that Borje has presented for the company, meaning anincreased focus on the core business.”

Ekholm wants to focus the business on lucrative corenetworks while restoring profitability in its IT & Cloud unit.It is also exploring partnerships or a sale of all or part ofits media unit.

“But plans are not enough to bring success, it is how theplans are implemented. And implementation has not beenEricsson’s strength as of late,” Gardell said.

Gardell also said he would join Ericsson’s nominationcommittee.

Ericsson’s U.S-listed depository receipts turnedpositive after the news and were up 1.9 percent by 1748 GMT.

Cevian, founded by Swedes Gardell and Lars Forberg, owns 168million Ericsson B-shares, 5.6 percent of the B-sharesoutstanding, according to the filing from the U.S. Securitiesand Exchange Commission.

The filing also showed Cevian owns 113,510 A-shares inEricsson, meaning it owns just over 5 percent of Ericsson’stotal share capital, based on 3.33 billion outstanding Ericssonshares.

The activist investor holds large stakes in companies suchas Swiss power transmission and industrial automation firm ABB, Swedish truck maker Volvo and Germanindustrial group Thyssenkrupp.

Business Daily Dagens Industri, citing an unnamed source,said last week that Gardell had met Ericsson Chairman LeifJohansson, and added the reason was that Cevian was eyeing thefirm.