Undeterred by high wages and lofty compensation packages for engineers and other high-tech professionals in Silicon Valley, the Swedish communications equipment vendor has been adding critical personnel to its R&D team in California as part of a plan to stay ahead of the competition by raising its intellectual property portfolio.

Like many of its rivals in the high-tech equipment market, Ericsson says it is conscious of the need to pare back operating costs at a time the global economy remains wobbly. However, executives at the company told EE Times that a strengthened IP portfolio is critical to future success in the communications equipment market where the wired and wireless segments are converging, forcing vendors to distinguish themselves on the strength of both hardware and software offerings.

"We believe in the transformation and convergence of the wireless and wired communications markets," said Johan Wibergh, senior vice president and head of the networks division at Ericsson. "The success of the mobile phone is undoubted and the success of the mobile broadband and the mobile internet will be the same. Broadband will still exist to some extent in the wired side but the big growth and expansion will occur in the mobile end."

At its annual Capital Markets Day held May 7 in Boston, Ericsson executives laid out their view of a future dominated by the Internet, which they said will permeate all forms of communications and information usage, including telephone and TV.

For Ericsson, though, mobile communication will be the defining market; hence the company's intense focus since 2003 on that segment, according to president and CEO Carl-Henric Svanberg.

"Broadband is our society's new highway and mobile is the key," Svanberg said. "The vast majority of the people in the world don't have access to fixed networks, so 80 percent of what is going to be broadband in five to 10 years will be wireless."

Svanberg said in preparation for that new future where wired and mobile communications converge, Ericsson is pouring more funds into research and development, including software products, which the company believes will be even more important as a competitive tool in future.

"IP [Internet Protocol] technology and truly converging networks are changing Ericsson and we are taking steps to make sure we stay strong," Svanberg added. "That's why we are investing more in R&D than we make in profit."

The Ericsson boss was not exaggerating. The company's R&D budget has been growing annually and Ericsson expects to keep up the spending even through the current economic downturn.

In 2008, Ericsson spent $4 billion, or 30.9 billion Swedish Kronas, on R&D, up 7 percent from $3.7 billion in 2007 and $3.5 billion in 2006. In 2008, Ericsson reported net income of $1.5 billion. 2007 and 2006 net profits were $2.8 billion and $3.4 billion, respectively.