A Brief History of L M Ericssons

Lars Magnus Ericsson began working with telephones in his youth as an instrument maker. He worked for a company which made telegraph equipment for Swedish firm Telegrafverket. In 1876 he started his own company and in 1878 began producing telephone equipment . His phones were not a new design, being based on the inventions already made in the USA. Through the repair work done by his firm for Telegrafverket and the Swedish Railways, though, he was familiar with the telephones of both the Bell company and Siemens & Halske. He improved on these designs to produce a higher quality instrument. These were used by the new telephone companies such as Rijkstelefon to provide lower cost service than Bell could offer. He had no patent problems, as Bell had not bothered to patent the invention in Scandinavia. Ericsson’s work as an instrument maker is reflected in the high standard of finish and the ornate design which makes Ericsson phones of this period so attractive to collectors.

Ericsson became a major supplier of telephones to Scandinavia. The factory could not keep up with the demand, so work such as joinery and metal-plating was contracted out. Much raw material was imported, so in the following decades Ericssons bought into a number of firms to ensure supplies of brass, wire, ebonite and magnet steel. Much of the walnut used for cabinets was imported from the USA.

When Ericsson and H T Cedergren of S.A.T. toured the USA in 1885, they found that the US was ahead in switchboard design, but Ericsson telephones were as good as any available.

In the late 1890s, as the Swedish market was reaching saturation, Ericssons expanded into other countries through a number of agents. Britain and Russia were early markets. Factories were built in these countries . Their influence expanded into other countries by buying into existing firms like S.I.T. in France in 1911 and Deckert & Homolka in Vienna in 1908. In 1912 they bought a factory in Budapest. This was partly to improve the chance of gaining local contracts, and was partly because the Swedish factory couldn’t keep up the supply by itself. In many cases the existing local designs were kept, being modified with Ericsson parts as the local production increased. These local versions are often quite unusual and attractive. Their production numbers were usually modest, so they are also often quite rare.

By 1897, Britain accounted for 28% of LME’s sales. The National Telephone Company was a major customer. In 1903 Ericssons set up a joint venture company with the National Telephone Company to produce telephones at Beeston for sales to Britain and its colonies. Mostly these were copies of the Swedish models, but they also produced components built under license from other companies. Beeston gradually simplified the ornate Swedish designs into forms more suitable for mass production. This also reflected the changing styles of the times. Both wall and table phones were becoming more boxlike in their design. A concession to style was in the elaborate transfers that decorated the cases. These phones are also highly collectable and attractive.

World War 1, the following Depression, and the loss of its Russian assets after the Revolution slowed down LME’s development and restricted its sales to many countries such as Australia. Many of its previous client countries were now buying phones from the Beeston factory (this was a sore point betwen Ericssons and their British offshoot) or starting to manufacture their own. The purchase of other related companies put pressure on Ericsson’s finances, and control of the company fell into the hands of K F Wincrantz. Wincrantz was backed by Ivar Kreuger, an international financier. In 1930 Kreuger gained control of the company, and used its assets and name in a series of bad international financial dealings that had nothing to do with telephones.

Financially weakened, Ericssons was now being looked at as a takeover target by Sosthenes Behn's International Telephone & Telegraph, their main international competitor. In 1931 ITT acquired from Kreuger enough shares to have a majority interest in Ericssons. This news was not made public. There was a Government -imposed limit on foreign shareholdings in Swedish companies, so for the time being the shares were still listed in Kreuger’s name. Kreuger in return was to gain shares in ITT. He made a profit of $11 million on the deal.

The company’s shaky financial position was becoming evident. LME found that Kreuger had invested in some very doubtful share deals, and the losses to him and the company would be significant. ITT started to examine the deal they had bought into and found that they had been seriously misled about the company’s value. They summoned Kreuger to New York for a conference, but he had a “breakdown”. As the word of Kreuger’s financial position spread, pressure was put on him by the banks to provide security for his loans. ITT cancelled the deal to purchase the Ericssons shares. Kreuger was required to repay the $11 million , which he could not do. Under increasing pressure, he committed suicide in Paris in 1932. Ericssons, a basically stable and profitable company, was only saved from bankruptcy and closure with assistance from loyal banks and some government backing.

In the 1920s and 1930s, many governments were consolidating their telephone systems. The fragmented systems which had grown up over the years, serviced by many small private companies, were integrated and offered for lease to a single company. Ericssons had some successes in obtaining these leases, and some losses. They were vital to the company, as they represented further sales of equipment. The other large telephone companies, of course, had the same goal in mind. Ericssons managed to get almost one third of its sales under the control of its telephone operating companies in countries as far afield as Mexico and Spain.

ITT tried to start negotiations between the major telephone companies aimed at dividing up the world between them, but the sheer size of the ITT empire made it hard to compete with. With its financial problems, Ericssons was forced to reduce its involvement in telephone operating companies and go back to what it did best, manufacturing telephones and switchgear. It could do this easily, as it had a hidden asset in its overseas manufacturing facilities and its associated supply companies. These were generally in a sound position.

The Beeston factory in Britain became a very useful asset now. In 1911 Ericssons had finally bought out National. They built automatic switching equipment for the British Post Office under license from Strowger, and they exported a large amount of their product to former colonies like South Africa and Australia. The Beeston factory was turning over as much in sales as the parent company. The British government divided its contracts between its local manufacturers. LME’s manufacturing facilities in Britain helped them to get a large share of the contracts. Sales drives were resumed after the Depression, but the company could not achieve the same market penetration that they had at the turn of the century. Although they still produced telephones, switching equipment was becoming a bigger part of their range. With the use of moulded thermoplastic phones (bakelite etc), the distinctive Ericsson styles soon became subdued. After all, there is only so much you can do with bakelite. Production increasingly turned to generic designs such as those from the British Post Office.

In spite of this , LME has still managed to retain their position as one of the world’s telecommunications leaders. They released one of the first handsfree speaker phones in the 1960s. In 1956 they released the Ericofon, which was such a radical departure in phone styling that it has become highly collectable. Their crossbar switching equipment is the mainstay of many telephone administrations around the world. Their influence is still felt strongly in such areas as mobile phones, where their reputation for quality is as strong as ever.

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