Ericsson Forges On

Despite market uncertainty, company pushes 3G, Bluetooth.

Instability in the wireless industry is vexing leading vendors such as Ericsson AB, but despite deep personnel cuts and gloomy product forecasts, officials said theyre sticking with next-generation technologies such as Bluetooth and WCDMA.

"There is a waiting game ahead of investments in new technology," Ericsson President and CEO Kurt Hellström said at the companys technology summit here last week. "This happens at the same time as operators are on the doorstep to a major technology shift to 3G."

Hellström said Ericsson, in Stockholm, Sweden, plans a full-system, precommercial launch of Wideband Code Division Multiple Access products—to support so-called third-generation, or 3G, wireless data services—at the end of the year. Commercial services should be available by the middle of next year.

But its still not clear how many of the carriers Ericsson serves will be on board. Many have been hesitant to take the first steps toward any of the 3G technologies, WCDMA included, because of licensing costs, spectrum issues and tepid user demand.

Despite being a tough sell in tough times, Ericsson is also sticking with Bluetooth, the ever-nascent local wireless communication protocol that it invented in 1996. Although hundreds of companies belong to the Bluetooth Special Interest Group, the majority of Bluetooth products on the market come from Ericsson, including one phone, a headset and several add-on modules. Ericsson also manufactures Bluetooth radios for sale to other companies. The company plans to announce several more products at the Bluetooth Congress in Monte Carlo, Monaco, next month, officials said.

But officials acknowledge that more companies need to support Bluetooth for Erics-son to succeed with the technology.

"You need the critical mass," said Harri Koponen, vice president and general manager of the consumer products division at Ericsson. "Otherwise, its like the sound of one hand clapping."

Industry observers see problems with Ericssons plans and are voicing concern about a decreased focus on corporate users and about the creation of devices for 3G systems that dont yet exist.

"Theres a clash in reality there," said Fran Rabuck, practice manager of mobile technology at Alliance Consulting Group Associates Inc., in Philadelphia, and an eWeek Corporate Partner. "One side of the companys trying to sell things that arent real on todays bandwidth. ... I dont think theyre really addressing the reality of the corporate customer today."

Among the factors pointing toward a greater focus on consumer gear is Ericssons recent development and marketing deal with Tokyo-based Sony Corp. The deal is an effort to revive Ericssons flagging handset business, for which the vendor recently outsourced all manufacturing.

Ericssons mobile phone business continues to trim costs; plans are to reduce the staff from 14,600 to 5,000 employees by the end of the year. The objective is to restore an operating margin of 10 percent, but even with the cuts, officials are candid that that is not likely this year.

"We want a smaller, more flexible and lower-risk mobile phone business," said Sten Fornell, executive vice president and chief financial officer at Ericsson. On diminishing handset sales, Fornell said, "this has contributed greatly to our loss."

In keeping with the companys commitment to new technologies, however, officials confirmed that most of its new phones will include support for Bluetooth and that Sonys involvement will mean phones with streaming video capabilities.

"The mobile handsets of the future will be very different from what you see today," Hellström said. "The joint venture with Sony is a perfect match."