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NSN Suffers in Q4

Ray Le Maistre
1/26/2012

Weak network equipment sales in the final three months of last year were responsible for a grim set of fourth-quarter financials from Nokia Networks , which, in turn, didn't help parent Nokia Corp. (NYSE: NOK). (See Nokia Ends 2011 on a Low.)

Even though it now has the former Motorola Solutions mobile networks products and customers on board (the acquisition closed in April 2011), NSN's fourth-quarter revenues were down 4 percent year-on-year at just over €3.8 billion (US$5 billion). Just more than half of those revenues were generated by the vendor's Global Services business.

The vendor noted that year-on-year revenues would have dipped by 11 percent without the contribution of the former Motorola assets.

Table 1: Nokia Siemens Networks Q4 2011 Key Financials

In millions of euros Q4 2010 Q4 2011 Y/Y change Q3 2011 Q/Q change
Revenues 3,961 3,815 -4% 3,413 12%
Reported operating profit 1 67 NA -114 NA
Adjusted operating profit* 145 176 21% 6 NA
* excluding one-time costs and special items
NA = not applicable/measurable




Performance varied depending on geography. As the table below shows, sales dipped significantly in Europe and China.

Table 2: Nokia Siemens Networks Q4 2011 Revenues by Region
In millions of euros Q4 2010 Q4 2011 YoY change
Europe 1,357 1,272 -6%
Middle East & Africa 423 394 -7%
Greater China 508 438 -14%
Asia/Pacific 978 909 -7%
North America 226 293 30%
Latin America 469 509 9%
Total 3,961 3,815 -4%




The one bright spot for NSN in the fourth quarter was an increase in its gross margin (excluding the impact of one-time cost), which increased to 29.2 percent from 26.4 percent a year earlier. NSN attributed the higher rate to a higher proportion of software sales, a better performance by Global Services and the impact of the former Motorola assets.

Now the company is in for a tough first quarter of 2012 in terms of its bottom line as it starts to implement the restructuring program that will see at least 17,000 of NSN's near 74,000 staff lose their jobs. The company noted that it expects to report substantial charges related to the headcount reduction when it reports its 2012 first-quarter results. (See NSN Could Lose More Than 17,000 Staff.)

Full-year performance
NSN's full-year revenues of €14.04 billion ($18.5 billion), up 11 percent from 2010, were boosted by the addition of the Motorola assets, but the company noted that even without those additional products and customers its like-for-like revenues still grew by 4 percent compared with the previous year's numbers.

Table 3: Nokia Siemens Networks Full-Year 2011 Key Financials
In millions of euros 2010 2011 Y/Y change
Revenues 12,661 14,041 11%
Reported operating profit -686 -300 56%
Adjusted operating profit* 95 225 137%
* excluding one-time costs and special items




But what about NSN's year-long assertion that it would grow faster than the market in 2011? It's too early to call, according to NSN, as there is "insufficient data" available currently.

In terms of regional performance, NSN managed to grow its business everywhere except in Europe, the Middle East and Africa.

Table 4: Nokia Siemens Networks 2011 Revenues by Region
In millions of euros 2010 2011 YoY change
Europe 4,628 4,469 -3%
Middle East & Africa 1,451 1,391 -4%
Greater China 1,451 1,465 1%
Asia/Pacific 2,915 3,848 32%
North America 735 1,077 47%
Latin America 1,481 1,791 21%
Total 12,661 14,041 11%




Quite what NSN will look like by the end of 2012 is hard to say as the company is still revamping its portfolio and seeking buyers for unwanted product lines as it focuses on mobile broadband, customer experience management and Global Services. (See Adtran to Buy NSN's Broadband Unit, NSN to Sell WiMax Biz , Analysts: NSN Focus Makes Sense and NSN Unveils Its Kill List .)

— Ray Le Maistre, International Managing Editor, Light Reading

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