Managed Services

NSN's 2010 Confidence Slips

It's been a busy week for Nokia Networks , as it announced a major acquisition and an enormous Long Term Evolution (LTE) deal in the US, both of which should help its medium- and long-term growth prospects. (See NSN Lands $7B LTE Deal in US , NSN to Buy Moto's Wireless Biz for $1.2B , and NSN Expands in North America With Moto Buyout.)

The short term is still something of a problem, however.

Having previously been bullish about its prospects for 2010 -- the vendor had been confident of growing faster than the market following a revamp of its strategy -- NSN now says it is set to "maintain its market share in 2010" in a global industry (mobile and fixed infrastructure and related services) that's still expected to be flat compared with 2009. (See NSN Targets Greater Market Share and NSN CEO: Don't Write Our Obituary.)

The main reasons for the pessimism are the "ongoing industry-wide issue related to security clearances in India, which is preventing the completion of product sales to customers, and shortages of certain components that are affecting the broader industry."

Those shortages hit Alcatel-Lucent (NYSE: ALU) and Ericsson AB (Nasdaq: ERIC) during the first quarter. (See AlcaLu Feels the Squeeze in Q1 and Carrier Caution Cuffs Ericsson in Q1.)

Nokia Siemens's cost-cutting program will continue, though, and despite the dampened outlook for sales, NSN's parent, Nokia Corp. (NYSE: NOK), stated today in its second-quarter earnings press release that it expects NSN to record an operating margin (after one-time items and special charges) of breakeven to 2 percent this year. (See Nokia Reports Q2.)

In 2009, the vendor reported massive losses. (See Nokia Siemens Shrinks 18% in 2009 .)

For the second quarter, Nokia Siemens reported revenues of €3.04 billion (US$3.9 billion), down 5 percent from a year ago, but 12 percent better than the first quarter's sales. At constant currency rates (stripping out the impact of currency exchange fluctuations), the quarter's revenues were down 11 percent from a year ago and up 10 percent sequentially. (See NSN Shrinks Again, But Q2 Looks Rosier.)

Its operating loss of €179 million ($230 million) was an improvement year-on-year and sequentially. Without one-time costs and special items, NSN managed an operating profit of €51 million ($65.6 million).

Table 1: Nokia Siemens Networks Q2 2010
In millions of euros Q2 2009 Q2 2010 Y/Y change Q1 2010 Q/Q change
Revenues 3,199 3,039 -5% 2,718 +12%
Reported operating profit -188 -179 +4.7% -226 +21%
Adjusted operating profit* 2 51 +2,450% 15 +240%
* Excluding one-time costs and special items

Nokia Siemens, which noted it employed 65,251 staff at the end of June, doesn't provide any financial details on specific product lines, but noted that its services division generated revenues of €1.4 billion ($1.8 billion), 46 percent of second quarter sales.

The outlook for the third quarter reflects NSN's tempered expectations. With no sign of any letup in the components shortages, and the Indian procurement problems still not resolved, Nokia Siemens anticipates revenues of €2.7 billion to €3.1 billion ($3.47 billion to $4 billion) for the three months to the end of September.

— Ray Le Maistre, International Managing Editor, Light Reading

optiwizard 12/5/2012 | 4:29:11 PM
re: NSN's 2010 Confidence Slips

Since the announcement of the merger, now already more then 3 years ago, the Joint Venture of Nokia and Siemens only decreased in Sales volume and in profitability. Before the merger, the separate units, Siemens Communications and Nokia Net represented a sales volume of more then 15 BEuro on a yearly base. Today, NSN is far away from that number, and every quarter they tell the same story, the long term future looks bright, nobody is telling how many years we have to wait to see this long term future.

Both mother companies, Nokia and Siemens already discussed to get rid of this ugly child under their umbrella, but who is willing to put a dollar on the table for this company without value. This week, they had another idea to buy some assets of Motorola, just to buy customers in the North American region, but I assume that most of the customers will understand that laying their eggs in the long term basket of NSN is a dangerous idea.

digits 12/5/2012 | 4:29:11 PM
re: NSN's 2010 Confidence Slips

Maybe once it has the Motorola assets on board it will aim for an IPO....

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