|
Pausing between bites of his chicken Caesar salad, Ericsson's
Åke Persson reflects on his employer's spring peace agreement with Qualcomm, a settlement that ended patent litigation, led to a unified standard on the next generation of wireless technology and brought Persson to San Diego to run the former Qualcomm infrastructure division. "It wasn’t really a pleasant situation," Persson says of the period leading up to the settlement. "We were definitely in the position to just crush Qualcomm. But we decided that wouldn't do anything. And at the end of the day it wouldn't really be a very good feeling. So instead we said, 'OK, let's take this opportunity and make something good out of it.' So we did."
Thus did 1,300 San Diego telecommunications employees find themselves working in March for one employer, Qualcomm, when the news broke, and by late May, for Ericsson, the world's largest wireless company.
For Persson, 54, the move landed him the job as president of Ericsson's CDMA Systems business unit. And it brought him back to a town that in the early 1990s had nearly enticed him to bolt the Swedish mother ship. Back then, he and his wife, Lisbeth, got as far as looking at houses. He won’t identify the potential employer, except to say it wasn’t Qualcomm.
The consensus among analysts and local technology players is that landing Ericsson is a good-to-great thing for San Diego. With 40 percent of the world's wireless telephone market, the 123-year-old company earlier was noticeable by its absence in an area that likes to bill itself as "Telecom Town." After all, San Diego already is home not only to local hero Qualcomm and up-and-comers like Neopoint, but also hosts significant presences from world-stage players such as Nokia and Motorola.
"The Gateway move probably got more press, simply because it was a headquarters," says Vicki Marion, president of the San Diego Telecom Council. "But Ericsson, putting its money in and keeping its facility here, and even building here, is really a good sign for us."
Yet landing Persson as the executive in charge also is seriously noteworthy. With three decades of telecom experience, he instantly becomes an industry dean and brings a wealth of business savvy — business, not engineering — that may be unmatched in San Diego.
Born In A Small Town
Persson was born and raised in Vindeln, a village of 4,000 in northern Sweden. After graduating from the University of Uppsala with a degree in theoretical physics, he set his sights on one job — and didn’t get it. "They didn’t respond to me, so that’s when I thought, 'Well, I’ll take Ericsson then. Hopefully later I’ll get a better job.' They eventually returned my call and said, 'Yes, you got the job.' Of course I was too embarrassed to start (and leave Ericsson). 'I can stay here for a while,' I said to myself. 'I will stay for three years, no more than that.' It’s been 29 years; 29 very, very interesting years."
For the first 10 years, Persson worked on a switching equipment design team. Then "somebody actually suggested that I should transfer into marketing. I ended up in marketing and sales for Ericsson's public switching equipment in Western Europe for a couple of years." Next he was assigned the task of setting up a cellular systems unit. Later promoted to head the worldwide cellular systems unit, Persson was tasked in 1982 with leading Ericsson's effort into the U.S. market. Next, while still based in Stockholm, he was put in charge of the mobile radio and mobile data division.
In 1991 he took a leave to join the New York office of one of Ericsson's customers, Ram Mobile Data. (Ram was later acquired by Bell South.) It was when he left that position in fall of 1992 that Persson considered a job in San Diego. He eventually decided to rejoin Ericsson, working first in New Jersey and then in Raleigh when the company moved its U.S. headquarters to the Research Triangle area of North Carolina.
By early 1995, Persson found himself back in Stockholm working as vice president of marketing for Ericsson Mobile Systems, a position he held until coming to San Diego.
A Surprising Ring
Once upon a time, the word "scrappy" was appropriate for Qualcomm in its uphill quest to win market for its proprietary CDMA. Two years ago, at about 10,000 employees strong and with royalties pouring in from its ownership of the world's fastest growing wireless technology, a different Qualcomm was engaged in a very sophisticated fight to ensure that its essence was part of the so-called Third Generation, or 3-G, technology set to be the heart of future wireless devices. Ericsson had other ideas. It alone among the major wireless players had licensed no part of CDMA. Now it was proposing the rapid introduction in the very mature European cell phone market of a 3-G technology, based on its own flavor of CDMA, that was incompatible with Qualcomm's. The reaction in San Diego was swift. Attorneys were brought in, high-profile lobbyists hired and U.S. lawmakers contacted. Qualcomm knew that if customers it was wooing today could not easily migrate to 3-G in the future, those folks would be more likely to buy another current technology, like Ericsson's.
In those days it was Persson who frequently gave the Ericsson position to the telecom trade press. And behind the scenes it was Persson who led the Ericsson negotiations to settle the 3-G dispute. (His Qualcomm counterpart was Steve Altman, Qualcomm's marketing director of radio and communications.)
For media purposes, the scuffling was condensed to Qualcomm vs. Ericsson. However a more accurate fight card would show Qualcomm vs. Ericsson and most of the telecom world.
When a settlement was announced in March, it made news worldwide. The perceived enmity between the two players seemed so deep that a story about the deal on the San Diego Metropolitan Web site, sandiegometro.com, led off by declaring: "Now we know what hell freezing over sounds like." When the static cleared, Qualcomm had disposed of — for a reported $250 million — a division that was losing up to $30 million quarterly, settled a pile of intellectual property rights disputes and licensed Ericsson to build CDMA phones. (The first phones should roll off a North Carolina assembly line in the second quarter of 2000.) Given Persson's leadership role in the negotiations, his selection to head Ericsson's San Diego acquisition was a natural.
Both then, and now, analysts like what they see.
"I think that particular purchase was a smart move both on the part of Qualcomm and Ericsson," says Naqi Jaffery, who tracks the industry for Dataquest. "First of all, Qualcomm, although it developed the technology, was not that successful in really marketing its infrastructure equipment. The business unit was essentially a money-losing proposition. The reason was Qualcomm does not have the marketing resources of a company like Ericsson."
Qualcomm has about 200 marketing people selling products around the world. Ericsson has 20,000.
The San Diego Design Center, Qualcomm's old headquarters and maybe the most architecturally interesting building in Sorrento Mesa, is now home to Ericsson's infrastructure division.
|
In addition, Jaffery notes that CDMA operators expect the vendors to finance equipment purchases. Ericsson, with 1998 annual sales of $24 billion (Qualcomm posted $3.34 billion in that same period), is in a strong position to do that, as its recent $330 million agreement to sell equipment to a Qualcomm spin-off, Leap Wireless, demonstrates.
Persson sees great potential with this, the 10th Ericsson business unit.
"This telecom infrastructure industry that we are part of is a $43 billion annual business and Ericsson has a 30 percent market share. Now that’s where we are despite the fact that we’re not taking part at all in the CDMA portion so far. I mean, now we are, but before this acquisition we weren’t."
Within three to five years, he expects to capture 20 percent of the CDMA market. Dresdner, Kleinwort, Benson Research projects that CDMA infrastructure spending will total $9.5 billion this year and, when combined with 3-G infrastructure, will grow to about $57 billion by 2004. If that and Persson's projections are accurate, Ericsson's San Diego operations would post $10.35 billion in sales in five years.
"My objective is to develop this into a profitable business unit for Ericsson," Persson says.
Rallying The Troops
Persson is attacking his goals with 1,300 employees, some of whom were none to happy to learn last spring they were changing employers.
Ericsson's purchase of the Qualcomm infrastructure division left many workers feeling, at least initially, financially betrayed. Qualcomm's shares had been poking around $55 for much of 1998. But news of the deal with Ericsson, along with other positive events, sent the stock skyrocketing. And one point this year, that $55 share from December 1998 was worth, when a split is factored in, $440. And those employees were party to option plans that, after five years, let them buy shares at prices way beneath the market. However, many of those employees had not worked at Qualcomm long enough for those shares to vest. When they came over to Ericsson, "poof" went those unsecured options.
From Persson's perspective, Ericsson got pulled into something not of its making.
"I guess the employees felt that Qualcomm tried to sneak away from fulfilling promises they had made to their vested stock options. First of all, Ericsson had nothing to do with that. It was not related to us. Secondly, as a result of the acquisition, the stock price went up dramatically and everyone wanted to have a piece of that and there was a lot of dissatisfaction over the fact that people saw that something was going away that they thought they owned. But of course, when you are dealing with stock options, you don’t own anything because it is an option that you have. It is not a right and there's always risk involved."
Eventually, Qualcomm agreed to reimburse employees 20 percent to 50 percent of what the unvested options were worth. Some employees left when Ericsson came in, but most stayed.
Wendy Faulk, vice president of marketing and communications for Ericsson in San Diego, was one of the Qualcomm employees working behind the scenes on the Ericsson deal. Employees sensed something was up, but, Faulk notes, securities laws prevented management from saying anything. Qualcomm, she says, worked hard to get the best deal for the affected employees. Yet she also understands the employee frustrations of the time, and says those feelings are now largely gone, as the Ericsson culture has been well-received.
Indeed, to bring the company together, an ice cream social was held recently in the landscaped recreation area, which sports a lap pool, two tennis courts, a sand volleyball pit and full-sized basketball court. Persson's blue eyes flash with delight when asked about the social. He had a great time, but says it was something very foreign to Ericsson in Stockholm. One thing Stockholm now does understand better is the importance of stock options in the U.S. employment arena. An employee plan — primarily for workers in the United States — was announced last month and, if approved by shareholders this month, will debut in January.
Whose Products Anyway?
For now it is primarily Qualcomm products that Ericsson is selling from San Diego. Even much of the assembled base station equipment on the factory floor carries the Qualcomm label. "If you change a sticker, you need FCC approval," says Todd Norman, a factory production manager.
Persson expects the merger of the research and development creativity that Qualcomm was known for, and the practiced manufacturing business skills of Ericsson, will improve the product line.
"We will try to employ 'best practices' (management) within Ericsson here in San Diego, while still retaining the entrepreneurial spirit that was very much the trademark of (Qualcomm)," he says. "To me, that is very important — to still have a very creative, innovative environment. However, it should be well-directed and managed, managed in a way that implies somewhat of a change in the environment, but again a necessary change. So far, what we have done has been really very much appreciated I think, and you may talk to other people. We are introducing some methodology and a little bit of discipline, if you like, in how you manage your projects. At the end of the day, everybody, well, most people, like some law and order. We’re doing that to increase our productivity and to make sure we are being effective."
Not that the product line doesn’t need a little work.
"We inherited an electronic portfolio from Qualcomm which needs to be brushed up," he says. "That's what we’re doing. And we’re spending much more time on that than we actually should be. If there's anything that we’re disappointed in, it’s that we thought before the company was in better shape."
Norman expresses confidence Ericsson will succeed. Walking back from a factory tour to the main office, he praises Ericsson the employer and speaks positively of the discipline the Swedish company has brought to the effort. "An actual business plan," he says. "Imagine that."
But That CDMA-Bashing thing...
Yet walking around the San Diego Design Center, which for most of this decade was ground zero for corporate Qualcomm, it is hard not to recall how hard Ericsson once did bash CDMA. It was from the same suite of offices where Persson now runs the division that Qualcomm CEO Irwin Jacobs plotted strategy. Only 18 months ago, numerous analysts had tabbed the 100,000-plus employee Ericsson a clear winner in the 3-G race. But for Qualcomm's creative tenacity, they may have been right, and it may have been a European-flavored CDMA driving the 3-G bus.
Persson agrees Ericsson was late to the CDMA party, but says it was a matter of business choice and nothing personal against the technology.
"I think you cannot be everything to everybody," he says. "Strategy means choice. All along when you’re running a business you have to make strategic decisions. And for us we made a decision in the early '90s that we couldn’t afford to do IS-95 (CDMA). We did other things instead. That's proven to be very good for the company. So we have spent our money developing other technologies and that has been very successful. We’ve been very successful in deploying these and it’s been good for Ericsson. Now at some point in time we wanted to get into this business and the opportunity was really to do it now."
And it isn’t like Ericsson, with a presence in 140 countries, has to start from scratch. For example, while Qualcomm is making CDMA inroads in South America and Latin America, Ericsson is a familiar player. The company has a long history, and 2,000 employees, in Mexico. Same goes for Brazil. "Ericsson's been one of the largest employers in Brazil since the beginning of this century," notes Persson, who recently oversaw the sale of $200 million of CDMA equipment to Mirror S.A. in Brazil.
Joining The Community
Ericsson's entry into the market has not gone unnoticed by the region's professional organizations and nonprofits. Persson is being very careful about whom the company allies with, and where it spends its money. So far he has joined UCSD Connect and is considering joining the San Diego Telecom Council. Ericsson's highest-profile move is the sponsorship of the millennium-focused Balboa Park Exposition 2000. But that didn’t come about until Persson personally spent a day at the park. "I had to go to the park and see if I'd actually be adding to the value of the Ericsson name. I found that it would. It would add a lot of value."
In the short term, he's likely to disappoint most of the executive and development directors who have made pitches. He knows what they want — Ericsson's money. What he needs is time to learn why Ericsson should take part. Yet in the end, Persson promises Ericsson will have a strong and lasting presence in San Diego, although he laughs when asked about the possibility of putting the company’s name on a new Downtown ballpark. (Ericsson already has its name on Ericsson Stadium in Charlotte where the Panthers play pro football.)
"We are here to become a good corporate citizen," he says. "So how do you do that? I don’t think you can do it overnight by signing up with 15 nonprofit organizations. I think you can do that by proving yourself over time."
Happy To Be Here
Persson and his wife live in Del Mar. A lifelong skier and fly fisherman, he is delighted to live near the beach. He also has explored San Diego, venturing Downtown — he came away impressed — and down incomplete freeways. "The one thing I dislike terribly, and I don’t know how you ended up in this mess, is the traffic. It is bad. If you really want to get rid of the last reason for anybody not to move here, finish (State Route) 56," he says. Having driven the length of 56, he speaks with amazement about the car-sized potholes in the dirt midsection that links the finished ends of the highway.
In interviews, Persson comes across as honest, open to all questions and with perhaps a bit of a tough edge. He has a sly sense of humor, such as when asked if there were any particular special characters in a Swedish name. "Well there's a dot above the 'i,'" he says.
Above all, Åke — it’s pronounced like "OK" with a soft "K" — Persson seems happy to be in San Diego. Ask him if he is an interim manager, and the answer is a quick "no." As he stands in the recreation area behind his office for a photographer, he's quizzed on what his friends back in Stockholm will think about him appearing on the November cover of a magazine with palm trees waving in the sky behind him. He says nothing, but a big smile crosses his face. Hardly the look of a man interested in crushing anything.
|
