NSN reports surprising 1Q results, while Ericsson slumps

While Ericsson reported a bruising first quarter, characterized by a profit slump of 26 percent on weaker sales in emerging markets and continued restructuring charges, historically struggling Nokia Siemens Networks (NSN) reported a surprise profit in the quarter even though sales fell 9 percent.

Things had gotten so bad for the NSN venture this year that analysts and media pundits were suggesting actions as to either sell the venture or dismantle it. The partnership has struggled for profitability ever since its inception three years ago.

NSN's sales reached $3.6 billion, which is down 9 percent year over year and down 25 percent sequentially. Services contributed nearly half of of the total sales. The venture reported an operating profit of $20 million, compared with a loss of $163 million the previous year.

"Nokia Siemens Networks' profitability benefited from a positive sales mix in Q1," according to a statement from Olli-Pekka Kallasvuo, CEO of Nokia."I am also pleased to see encouraging results from the company's focus on helping operators meet the challenge of the rapid growth in data and signalling traffic from smartphones."

NSN has been racking up contracts and gaining momentum on the LTE side. It announced new frame agreements with China Mobile and China Unicom in the past week valued at $1 billion to extend existing GSM and 3G contracts. And Nokia surprisingly won a chunk of TeliaSonera's LTE business, beating out Huawei in January.

The second quarter for NSN is showing some promise. NSN expects it will report $4.1 to $4.5 billion in second-quarter revenue. Key growth areas for NSN continue to revolve around LTE and managed services.

Meanwhile, Ericsson reported a net profit of $174.4 million, down from $238.8 million in the year-ago period. The company's sales fell 9 percent to $6.26 billion, weaker than the $6.88 billion it had in the first quarter last year. However, the company's gross margin jumped to 39 percent, up from 36 percent in the year-ago period.

Ericsson said operators in a number of developing markets remained cautious on spending, which impacted its networks business. In an interview with FierceWireless, Ericsson CFO Jan Frykhammer said sluggish operator spending started in 2009 and likely won't improve overnight. Nevertheless, he said the company is seeing strong growth from operators in regions of the world, such as North America, where mobile broadband data is exploding. "Voice capex declined, but mobile broadband data capex increased," he said.

The Swedish company added that solid sales in its services business partly offset the decline in network sales. Ericsson's sales in China were down 15 percent and sales in India slipped 43 percent. 

Frykhammer said the company's integration of Nortel Networks' CDMA business is going very well. "CDMA customers started to show confidence when we purchased Nortel's assets, and that is a good thing for the business. We also acquired a design team with LTE skill sets. This is very important," he added.

For more:
- see this Rethink-Wireless article
- read this FierceWireless article
- see this FierceTelecom article

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