NSN: The Recovery Looks Real
While parent Nokia Corp. continues to struggle in the mobile handset market, networks and professional services offshoot Nokia Siemens Networks is at least proving that its recent financial improvement was not just a blip. (See Euronews: Nokia Still in Dire Straits.)
With its restructuring program now largely implemented, the vendor has been reporting healthier margins for the past few quarters, displaying the kind of financial stability that was previously missing. (See NSN Maintains Momentum, Has NSN Turned a Corner? and APAC Boosts NSN's Q3.)
The improvements don't stretch as far as its sales, though. NSN generated second-quarter revenues of €2.78 billion (US$3.64 billion), down 17 percent from a year ago and down 1 percent from the first quarter of 2013. Just more than half of all revenues were generated by the Global Services division.
Now, NSN has been selling off parts of its business it no longer deems core, such as its BSS and, more recently, its optical transport lines. It has also been exiting professional services deals that were not profitable. But even accounting for those factors, NSN's sales were still down by 11 percent compared with a year ago, with 2G/GSM and voice core technology sales suffering the most, while LTE sales increased. (See Euronews: Coriant Goes Solo and Redknee Seals NSN Deal.)
On a regional basis, revenues were down across the board except for in North America, where NSN managed a 16 percent increase in its year-on-year sales to €348 million ($456 million).
But the key for NSN is that while the total revenues might have shrunk, they're at least more profitable. NSN's adjusted second-quarter gross margin (after restructuring and other one-time costs) was 38.3 percent, a massive improvement compared with the 26.6 percent of a year earlier. In addition, the adjusted operating margin improved to 11.8 percent from 0.8 percent.
Even after all costs, NSN managed to generate a small operating profit of about €8 million ($10.5 million), compared with a loss of about €227 million ($300 million) a year earlier.
Nokia, which is to take total control of the equipment vendor, will be looking for further financial improvements to help shore up its finances, as the Finnish giant looks a very long way off achieving its smartphone aspirations. (See Why Is NSN Only Worth $4.4B? and Nokia to Take Full Control of NSN .)
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— Ray Le Maistre, Editor-in-Chief, Light Reading