Executives from Nokia Corp. (NYSE: NOK) and Siemens AG (NYSE: SI; Frankfurt: SIE) told a press conference today that, with annual revenues of €15.8 billion (US$19.9 billion) in calendar 2005, the new joint venture trailed only Ericsson AB (Nasdaq: ERIC) and the combined might of a merged Alcatel (NYSE: ALA; Paris: CGEP:PA) and Lucent Technologies Inc. (NYSE: LU), a.k.a. Lucatel, in terms of revenues derived from telecom carriers. (See Alcatel, Lucent Seal Deal.)
They also noted that, based on the 2005 sales numbers, Nokia Siemens Networks generates a clear majority, 78 percent, of its revenues from mobile operators. About 56 percent of total revenues comes from mobile infrastructure, while a further 22 percent derives from services to wireless carriers.
Fixed-line infrastructure accounts for 16 percent of revenues, while services to fixed-line carriers account for the remaining 6 percent. (See table 1.)
Table 1: Breakdown of Nokia Siemens Networks revenues
|% of total revenues||Value based on 2005 revenues|
|Wireless infrastructure||56||�8.85 billion|
|Wireless services||22||�3.48 billion|
|Fixed line infrastructure||16||�2.53 billion|
|Fixed line services||6||�948 million|
|Source: Nokia, Siemens|
In the joint venture's key market of wireless networks, it has a 23 percent share of the world's wireless networks market, which, including services, is currently worth €52 billion ($65.3 billion). Only Ericsson AB (Nasdaq: ERIC) is bigger, with a 26 percent share. (See table 2.)
Table 2: Nokia Siemens Networks: Competitive Rankings
|Company||Wireless Networks market share (incl. services): Total value �52 billion||Wireline Networks market share (incl. services): Total value �49 billion||Carrier Services market share (combined wireless & wireline): Total value �30 billion|
|Ericsson||26%||Included in Others||14%|
|Nokia Siemens Networks||23%||7%||13%|
|Cisco||Included in Others||10%||Included in Others|
|Motorola||7%||Included in Others||4%|
|Huawei||Included in Others||4%||Included in Others|
|Source: Nokia and Siemens, based on industry analyst research and company estimates|
The new venture's owners even claim the No. 3 spot in wireline, once services is included, with a 7 percent market share of a sector worth €49 billion ($61.6 billion). Lucatel leads the way here with 17 percent, followed by Cisco Systems Inc. (Nasdaq: CSCO) at 10 percent.
In the carrier services market -- the combined wireless and wireline services sector, worth an estimated €30 billion ($37.7 billion) -- Nokia Siemens Networks puts itself in second place, again behind Ericsson, and just ahead of Lucatel.
The management at Nokia and Siemens is very bullish about the joint venture's financial health. During Monday's press conference executives claimed it would be cashflow positive from day one (minus restructuring charges), would generate a double-digit operating margin in its first year (again minus charges), and experience faster growth than the market.
Neither company would comment any further on staff reductions, other than to say that up to 9,000 of the new company's 60,000 staff could lose their jobs, and also declined to offer any valuation for the joint venture, which will be divided into six divisions: carrier services; two wireless divisions based in Helsinki; and three fixed line divisions -- core networks, IP networks, fixed broadband access -- based in Germany.
Siemens AG's CEO Klaus Kleinfeld also took the opportunity to have a dig at the joint venture's competitors, and seemed to be prodding Lucatel in particular. He said that both parent companies "have a reputation for quality, and that's pretty unique in the industry."
He also said that Nokia Siemens Networks has "the right kind of wireless" in GSM and WCDMA -- a clear prod at Lucatel, which has a stronger position in CDMA technology, where Lucent is the number one vendor.
— Ray Le Maistre, International News Editor, Light Reading