Managed Services

Restructuring Costs Hit NSN's Q2

Nokia Networks managed to up its game during the second quarter of 2012 following a dreadful start to the year, but the company is still suffering significant operating losses, mostly due to significant restructuring costs as it shrinks its operations.

Its second-quarter revenues reached €3.34 billion (US$4.1 billion), a 13 percent improvement compared with a dismal first quarter, but down 8 percent compared with a year ago. Table 1: NSN Key Financials Q2 2012
In millions of euros Q2 2011 Q2 2012 Y/Y change Q1 2012 Q/Q change
Revenues 3,642 3,343 -8% 2,947 13%
Reported operating profit -111 -227 -105% -1,005 77%
Adjusted operating profit* 40 27 -33% -147 na
* Excluding one-time costs and special items

Like its rivals Ericsson AB (Nasdaq: ERIC), Alcatel-Lucent (NYSE: ALU) and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763), NSN experienced a dip in revenues from China, with sales from that key market dropping by 16 percent year-on-year to €340 million ($418 million), though its revenues from China did increase sequentially. The company also stated that its more focused strategy, announced last November, also affected revenues. (See Ericsson Sets Q2 Benchmark, AlcaLu Issues Full-Year Profit Warning, ZTE Issues H1 Profit Warning and Analysts: NSN Focus Makes Sense.)

In line with its main rival Ericsson, NSN also noted a dip in network infrastructure sales and an increase in services revenues, though the company doesn't provide any specific sales figures for its lines of business.

Its gross margin was 26.6 percent, unchanged sequentially or year-on-year. (Ericsson's second-quarter gross margin was 32 percent.)

NSN's operating loss, while not as dramatic as that of the first quarter, was still a long way from being break even at €227 million ($279 million), or 6.8 percent of sales, way worse than a year ago.

Excluding one-time costs, including restructuring charges of €190 million ($234 million), NSN's operating income was €27 million ($33.2 million), worse than a year ago but better than the first quarter. NSN said it has reduced its headcount by about 10,000 staff since the end of 2011: It had 63,328 staff at the end of June. (See NSN Could Lose More Than 17,000 Staff.)

— Ray Le Maistre, International Managing Editor, Light Reading

digits 12/5/2012 | 5:27:27 PM
re: Restructuring Costs Hit NSN's Q2

The big question is -- once NSN has completed its restructuring process, can it turn a profit? Make some real money?

That is what is going to determnine its fate, it seems. It needs to gain independence from its parent companies, which have already stated that they aren't going to put any more money in the pot, and surely it can only go solo once it has proven it can generate some profits (after all its costs, whatever they might be). 

Or is that asking too much?




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