NSN turns surprise profit; Ericsson reports surprise downturn

Having struggled to make a profit since being formed three years ago, Nokia Siemens Networks (NSN) reported a surprise Q1 profit, despite a 9 per cent fall in sales.

While the Q1 profit was a meagre €15 million--better than the loss of €122 million a year before--analysts were wrong-footed having been predicting a loss of €62 million. However, including one-off items, NSN still reported operating losses of US$301.4 million, an improvement on the US$481m operating loss of a year earlier.

Of particular note was NSN's delight in upstaging Ericsson by announcing new Chinese contracts worth €750 million, just days after the Swedish firm had revealed its own new deals in the country. Perhaps buoyed by this, NSN said that, although it forecast the infrastructure market would be flat this year compared to 2009, it expected to outperform that market and achieve some growth. It also looked forward to an operating margin of between break-even and 2 per cent.

Ericsson, meanwhile, disappointed the markets with a 27 per cent year-on-year fall in earnings. Net income fell to SKr1.26 billion (US$174m), while analysts had predicted profits of Skr2.02 billion. Revenue dropped 9 per cent to SKr45.1 billion, also missing analyst targets of Skr48.1 billion.

Of concern was the 50 per cent drop off in profits at the company's key network business, and sales declined in eight out of 10 sales regions, most dramatically in Africa and India. The bright star was North America where revenues doubled, perhaps helped by Ericsson integrating Nortel's CDMA, LTE and GSM businesses. Overall, the region accounted for more than 20 per cent of revenues.

In an effort to reverse this trend, the company booked Skr2.2 billion in restructuring charges as it stepped up its cost reduction program - in January, CEO Hans Vestberg increased job cut targets from 5,000 to 6,500 worldwide.

Vestberg, as per normal, refused to make a prediction for the total market but said Ericsson would outperform it, especially because of the boom in mobile data services and infrastructure.

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