Ericsson's new finance chief faces a tough crowd

By Adam Cox and Helena Soderpalm

STOCKHOLM (Reuters) - In the aftermath of its worst share price drubbing, Sweden's Ericsson (ERICb.ST) has turned to a young but well-traveled executive with a background in finance to help repair the damage.

The world's biggest maker of mobile networks equipment stunned investors last week with unexpectedly weak profits, sending its shares at one point down 30 percent.

Karl-Henrik Sundstrom, who had helped guide Ericsson through tough times for the whole industry, decided to step down and Ericsson replaced him with Hans Vestberg, head of the company's global services unit.

Vestberg is 42 years old but has already been with Ericsson for 16 years. He joined the accounting team for production in 1991 and then embarked on a journey from one far-flung Ericsson office to another.

He has been president of operations in Mexico and chief financial officer in North America, and has had positions in China, Chile and Brazil.

"I think he was the only one they could pick. He was one of the best candidates, a dynamic person. If you are to be the CFO of this company it's good if you understand the business. They chose a really strong card," said Helena Nordman-Knutson, analyst at Swedish brokerage Ohman Fondkommission.

Asked at a news conference why the company had chosen a top salesman for such a role, Chief Executive Carl-Henric Svanberg said being a leader in Ericsson was about working across departments.

"When you look at Ericsson it is not really that you're either a staff person or a line person. If you're a line person you're probably 70 percent line and 30 percent staff," Svanberg said.

"It is a combined effort that we are selling, so it takes a lot of intellectual capacity and understanding for the feel, the working together with the business, and also that involves the different processes including sales and so on."

Vestberg himself said he thought it was a good fit.

"With the background that I have, with the financial background I think also this can fit very well," he said. "Of course (there is) a difference in the working day, but also we've been working in services a lot with finances and understanding the market."

Investors have become sharply critical of Ericsson's internal accounting systems.

After the shock of the third-quarter earnings, analysts have asked repeatedly why the company did not provide more warning and what it is doing to address the problem.

Svanberg has said much of the issue has to do with the nature of Ericsson's sales cycle as the third month of each quarter tends to make up the biggest share of business. He said that rather than each month accounting for a third, it was more like 25-25-50.

But Svanberg also says the company is analyzing the situation and trying to understand how it can create better internal systems.

Whether Vestberg will be the person to come up with a solution is, for the market, of course still an open question.

Ericsson shares at 0945 GMT were down 1.4 percent, while the Swedish blue chip index was up 0.8 percent.

But analysts were broadly positive on the appointment.

"He is somewhat of a crown prince in the company," said one analyst, who asked not to be identified.

Vestberg suggested he was under no illusion about the task ahead of him. "In the circumstances of course it will be tough," he said.