Managed Services

NSN: Parts-Shortage Problems Easing

The network equipment components shortage problems that have affected major vendors this year are easing but aren't yet over, according to Nokia Networks , which issued its latest trading update today as part of parent company Nokia Corp. (NYSE: NOK)'s third-quarter earnings report. (See Nokia's 'Unpolished Gems' and Nokia Reports Q3 .)

NSN, which highlighted its recent mobile infrastructure successes today, reported revenues of €2.94 billion (US4.1 billion), 7 percent better than a year earlier, though down 3 percent from the second quarter. (See LightSquared Names LTE Suppliers, Telecom Italia, NSN Trial LTE in Turin, NSN Lands $7B LTE Deal in US , Euronews: Oct. 5, No Sign of Recovery for Nokia Siemens, and NSN's 2010 Confidence Slips.)

Table 1: Nokia Siemens Networks Q3 2010
In millions of euros Q3 2009 Q3 2010 Y/Y change Q2 2010 Q/Q change
Revenues +2,760 +2,943 +7% +3,039 -3%
Reported operating profit -1,107 -282 +74.50% -179 -57%
Adjusted operating profit* -53 -116 -119% +51 -327%
* Excluding one-time costs and special items

However, the third quarter is seasonally weak, and the sequential dip in revenues was not as steep as usual -- a year ago, third-quarter sales fell by 14 percent quarter-on-quarter.

NSN noted that better supply-chain conditions, and the end of the network purchase order deadlock in India (which hit its second-quarter numbers), helped its revenues. (See India Holdups Smack NSN's Q2.)

"Sales in the third quarter 2010 benefited from some improvement in overall component availability, as well as an improvement in the industry-wide issue related to security clearances in India which was preventing the completion of product sales to customers," it stated in Nokia's earnings press release.

The improvement in trading conditions in India, plus strong performance in Japan, led to a solid quarter in Asia/Pacific, where revenues were up sequentially and year-on-year.

Table 2: Nokia Siemens Networks Q3 2010 Revenues By Region
In millions of euros Q3 2009 Q3 2010 YoY change Q2 2010 QoQ change
Europe 1,061 1,070 +1% 1,136 -6%
Middle East & Africa 387 331 -14% 400 -17%
Greater China 335 311 -7% 357 -13%
Asia/Pacific 567 711 +25% 594 +20%
North America 127 175 +38% 181 -3%
Latin America 282 345 +22% 371 -7%
Total 2,760 2,943 +7% 3,039 -3%

As usual, the company's Global Services division was the bedrock of the vendor's sales, contributing €1.4 billion ($1.95 billion), nearly 48 percent, of NSN's quarter's total revenues.

Nokia's CFO Timo Ihamuotila noted that "we continue to hear strong and positive feedback from customers" about NSN, which is on course to cut its annual operating costs by €500 million ($696 million) by the end of 2011, compared with the end of 2009.

However, the company is still struggling to break even, reporting an operating loss of €282 million ($392 million).

Looking ahead, NSN expects its fourth-quarter revenues to be between €3.4 billion and €3.8 billion ($4.7 billion and $5.3 billion), which is in line with 2009's fourth-quarter revenues of €3.63 billion ($5.01 billion). The vendor still expects to maintain its market share in "a flat market in Euro terms for the mobile and fixed infrastructure and related services market in 2010, compared to 2009."

NSN expects its acquisition of Motorola Inc. (NYSE: MOT)'s wireless infrastructure business to close before the end of the year, a move that will boost its scale, portfolio, and presence in certain markets (especially North America) in 2011. (See Chief Supply Chain Officer Study - by IBM, NSN Expands in North America With Moto Buyout, and NSN to Buy Moto's Wireless Biz for $1.2B .)

— Ray Le Maistre, International Managing Editor, Light Reading

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