Managed Services

Nokia Siemens Shrinks 18% in 2009

Nokia Networks (NSN), which has suffered from a shrinking market, a loss of market share, and a number of M&A disappointments during the past year, has reported full year 2009 revenues of €12.57 billion (US$17.6 billion), down 17.9 percent compared with 2008. (See Ciena Beats NSN to Buy Nortel's MEN, Nokia Siemens Replaces Its CEO, and Ericsson Delivers Knockout Blow to NSN.)

The news comes only days after archrival Ericsson AB (Nasdaq: ERIC) reported that its 2009 revenues of 206.5 billion Swedish kronor ($28.6 billion) had (once the positive impact of exchange rate fluctuations had been stripped out) declined by 9 percent. (See Ericsson Keeps Its Distance From Huawei .)

Inevitably, NSN's decline in 2009 now puts it behind Huawei Technologies Co. Ltd. in the telecom infrastructure pecking order, if the Chinese vendor's full year revenues of $21.5 billion are verified by its auditors. (See Huawei Claims 2009 Revenues of $21.5B.)

The top line wasn't the only ugly entry in NSN's 2009 results, which were published as part of parent Nokia Corp. (NYSE: NOK)'s full year earnings report.

The vendor also suffered dramatic operating losses of €1.64 billion ($2.3 billion), though much of that came in the third quarter, when it reported an operating loss of €1.1 billion ($1.54 billion) as a result of significant goodwill impairment charges. (See No Sign of Recovery for Nokia Siemens.)

On the bright side for NSN, the vendor ended 2009 with a fourth-quarter operating profit of €17 million ($23.8 million) and some positive customer news. Without one-time charges and "special items," NSN's fourth-quarter operating profit was €201 million ($281 million). (See NSN Replaces Huawei in Euro LTE Rollout.)

And the vendor's professional services business once again proved to be a critical part of its business. It accounted for €1.7 billion ($2.38 billion), nearly 47 percent, of the fourth quarter's revenues of €3.625 billion ($5.08 billion).

Table 1: Nokia Siemens Networks Shrinks in 2009
In millions of euros Q4 2009 Q4 2008 % change Full year 2009 Full year 2008 % change
Revenues �3,625 �4,338 -16.4% �12,574 �15,309 -17.9%
Reported operating profit �17 - �179 +109% - �1,639 - �301 -545%
Adjusted operating profit* �201 �225 -10.7% �28 �757 -96.3%
* Excluding 'special items' and one-time charges
Source: Nokia

So is the fourth-quarter result the start of a recovery for NSN? Not immediately, though the company is optimistic about a better performance for the whole of 2010 following its recent revamp and shift in strategy that will see it cut more cost out of the business and focus on increasing its market share. (See NSN CEO: Don't Write Our Obituary, NSN Targets Greater Market Share, and Nokia Siemens Revamps, Cuts Jobs.)

NSN expects the market for fixed and mobile infrastructure and associated services to be worth about the same this year as in 2009 (in euros), but also believes it will gain market share and grow faster than the market overall.

That growth, though, looks as if it will come later in the year, as NSN expects its first-quarter revenues to come in at €2.6 billion to €2.9 billion ($3.64 billion to $4.06 billion), down from the near $3 billion ($4.2 billion) reported for the first quarter of 2009. The company also expects to report an operating loss for the first quarter, even after one-time charges and special items.

And despite the predicted growth, profits might be hard to come by during 2010 as the company chases after a bigger slice of the market: NSN expects its operating margin for 2010 (after charges and special items) to be between breakeven and 2 percent.

— Ray Le Maistre, International Managing Editor, Light Reading

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