Ethernet equipment

Slump Slams Nokia Siemens

Nokia Networks had a grim second quarter, with its sales falling at a faster rate than in previous financial periods, and faster than the overall market.

The vendor still expects the overall market for telecom infrastructure and associated services to decline by about 10 percent (in euros) this year, but its revenues dipped by a whopping 21.3 percent year-on-year during the second quarter to almost €3.2 billion ($4.5 billion). (See table below.)

Table 1: Nokia Siemens Networks Q2 2009
Q2 2008 Q2 2009 Year-on-year change
Revenues (euros millions) 4,067 3,199 -21.3%
Gross margin +28.2% +26.9% --
Operating profit (euros million) -47 -188 --
Operating margin -1.2% -5.9% --

That follows a 12.1 percent year-on-year sales decline in the first quarter, when NSN reported revenues of almost €3 billion ($4.24 billion).

So NSN's first-half 2009 revenues total €6.19 billion ($8.75 billion), down €1.28 billion ($1.81 billion), or 17.1 percent, from 2008's first-half revenues of €7.47 billion ($10.56 billion).

With its revenues retracting at a greater level than the overall market, NSN is now predicting it will lose market share this year. Previously it had expected to retain market share. The vendor says "a strong performance in its Services business unit [is] expected to be offset by declines in certain product businesses."

The relative strength of the Services division was highlighted today with the unveiling of a new, five-year managed services deal with Brazilian fixed and mobile carrier Tele Norte Leste Partricipacoes SA (better known as Oi) worth €1.1 billion ($1.55 billion).

The deal will see 1,000 Oi staff transfer to NSN, which will be the "sole provider of operations and maintenance" for the carrier's networks in 17 of Brazil's 26 states. NSN says it will also hire an additional 2,500 staff to run Oi's networks.

NSN's numbers were reported as part of Nokia Corp. (NYSE: NOK) earnings. The handset giant reported a 24.6 percent decline in revenues to €9.9 billion ($14 billion). That overall total includes sales from Nokia's three divisions -- Devices and Services, Navteq, and NSN.

Asia/Pacific hits NSN's numbers
NSN saw its sales increase in only one geographic market, North America, though that's also its smallest market by sales. The vendor is hoping to increase its sales potential in North America further with the acquisition of wireless assets from Nortel Networks Ltd. , though NSN may need to see off some rival bids to land its catch. (See NSN Picks at Nortel's Mobile Bones , NSN May Buy Other Nortel Assets, andWill Others Bid for Nortel's Wireless Assets? .)

It's biggest regional dip in sales during the second quarter came in Asia/Pacific (not including China), which reported a near 40 percent decline in revenues year-on-year. (See table below.)

Table 2: Nokia Siemens Networks Q2 2009 Sales by Region
In euros millions Q2 2008 Q2 2009 Year-on-year change
Europe 1,412 1,209 -14.4%
Middle East & Africa 553 459 -17%
Greater China 413 353 -14.5%
Asia/Pacific 1,076 648 -39.8%
North America 158 208 +31.6%
Latin America 455 322 -29.2%
Global total 4,067 3,199 -21.3%

— Ray Le Maistre, International News Editor, Light Reading

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