The Comeback Kid – Ericsson conquers the US

During most of its existence, Ericsson found it difficult to break into the US market. The first attempt was the opening of a plant in Buffalo, New York in the early 1900s. In the 1950s, the Ericofon (the Cobra) was developed with the American market in mind, but success was limited. AT&T (Bell Systems) and other giants in telecommunications always stood in the way.

Things started to happen in the 1980s, however. In 1981, Ericsson formed a joint venture with the US oil company Atlantic Richfield that was named Anaconda-Ericsson. The new company’s main products were cables, PBX equipment and transmission systems. Anaconda-Ericsson would also eventually market computers and other business-oriented products from Ericsson Information Systems.

The transmission operations of Anaconda-Ericsson got off to a flying start, mainly due to the fact that new carriers of long-distance networks like MCI needed equipment. The cable division fared less well than expected, while the sales of PBX switchboards picked up after a slow start.

Anaconda-Ericsson was also behind the introduction of the AXE-system on the US market. Because of strong domestic competitors like Northern Telecom and Western Electric, however, AXE only achieved limited success in the 1980s and 90s. But in February of 2001 Ericsson received a large order from WorldCom that meant a significant breakthrough on the fixed networks market in the US.  

The US also became important as a capital market during this period. In 1983, a new share issue valued at USD 240 million was implemented in the form of ADRs (American Depository Receipt). From that time on, large volumes of Ericsson shares have been traded on the New York Stock Exchange (NYSE).

The most important change occurred with the deregulation of the American telephone market and the break-up of AT&T (Bell Systems), which started in 1982. When operating licenses for mobile telephony were awarded, Ericsson became an attractive alternative for many companies that had been awarded licenses and were seeking a supplier.

130 would-be operators applied for licenses in the first 30 markets to be opened and when the FCC (Federal Communications Commission) had processed them it turned out that Ericsson had been specified as the systems supplier in 40 license applications.

Ironically, it was in Buffalo that ERA received its first US order for a mobile system, which was taken into operation on April 2, 1984. Orders followed thereafter from Chicago, Seattle, Houston, Cleveland and other cities. By the late 1980s, Ericsson was one of the three largest suppliers of mobile systems in the US with a market share of about 30 percent.

In the early 1990s, the time had come for the US to make the transition from the first-generation analog systems to second-generation digital systems. Thanks to its previous successes, Ericsson was now able to influence the technical requirements that were stipulated in the standards specification. AT&T and Motorola were both fighting for a technology called FDMA, while Ericsson supported TDMA, a technology to which the company had contributed significantly through the development of GSM. In field testing, TDMA proved most successful, and Ericsson was able to strengthen its position as a system supplier in the US market. Today, in early 2001, the US is not only Ericsson’s largest, but also its fastest growing market.

Success was achieved in mobile systems, but what about mobile phones? Up until 1989, there were no sales in the US market, but that year, Ericsson formed a joint venture with General Electric intended to change the situation. Ericsson GE Mobile Communications was the name of the new company, and Åke Lundquist, former president of ERA, became its first president. The new company was responsible for the development and manufacturing of mobile phones for the whole world. The head office was located in New Jersey, while production facilities were established in Lynchburg, Virginia and development was placed in Research Triangle Park in Raleigh, North Carolina under the leadership of Nils Rydbeck. The Mobile Telephone Laboratory in Lund, as well as manufacturing operations in Sweden, were also included in the new company.

The first years were a struggle for Ericsson GE Mobile Communications. This was due in part to cultural clashes between Ericsson and GE, and in part to difficulties in developing and manufacturing mobile phones for the US market. The turning point did not come until digital cellular systems were starting to be introduced in the US, which took place at about the same time as General Electric withdrew from the joint venture. The company was restructured in 1993 and became a wholly owned subsidiary called Ericsson Mobile Communications AB. The head office was moved to Kista, outside Stockholm.

The same year, in 1993, Ericsson restructured all of its US operations. The joint venture Anaconda-Ericsson had already become a wholly owned subsidiary in 1985 and was now named Ericsson Inc. Six business areas were created in which all product areas were included, radio systems, land mobile radio, mobile telephones, public systems, business networks and components. Ericsson Inc.’s head offices are located in Richardson, Texas, outside Dallas.

This restructuring quickly yielded results. By 1994, the plant in Lynchburg was already an efficient volume producer. Product development in Raleigh had also gained ground and was beginning to produce several models for the US market. Together with Nokia and Motorola, Ericsson at the beginning of the new century was one of the market leaders in mobile telephones.

Author: Text: Pontus Staunstrup

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