Ericsson doubles profits, NSN hit by shortages
Despite recent big announcements, NSN offers disappointing outlook
Published: 23 July, 2010
READ MORE: Financial | Ericsson | Nokia Siemens Networks
Continued ...
In the quarter all regions, except north America - where Ericsson has grown significantly following its acquisition of several Nortel businesses - showed lower year-on-year sales. The cost reduction program, initiated in the first quarter of 2009, has now been completed with annual savings calculated at Skr15bn to SKr16bn from the second half of 2010.
The Networks unit's sales declined by 12% year-on-year. Voice-related sales, such as 2G access and circuit switched core, continued to decline and were only partly offset by a rise in 3G systems, including radio, backhaul and packet core. The CDMA business acquired from Nortel "continued to develop favourably" though hurt by the component shortages and supply chain bottlenecks. Demand for microwave backhaul was also strong in the quarter.
EBITA margin in the quarter increased year-on-year to 17% from 14%, despite lower sales, positively impacted by continued efficiency gains and a business mix with a high proportion of network expansions.
Meanwhile, Global Services sales were flat year-over-year, but up 11% sequentially. Global services sales account for some 42% of total Group sales. Professional Services sales increased 5% year-on-year and in local currencies by 9%. Managed Services sales in the quarter increased by 23% but Network Roll-out sales were down 12%.
The continuing issues at NSN have sparked new reports that both parents have considered exiting the venture, according to The Wall Street Journal. The report - citing "people familiar with the matter" - says that both firms have evaluated their stakes in recent month, and Siemens has been looking for an exit since late 2009, selling to Nokia or another "credible buyer". But the WSJ says Nokia will not buy out its partner because it may want to leave too.
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