re: Wireless Today on Nokia Q1
>> Gap Widens Between Nokia, Ericsson
Malcolm Spicer
Wireless Today
April 23, 2001
First-quarter earnings reports released Friday showed just how much better Nokia [NOK] is performing than its rival Ericsson [ERICY].
Ericsson's profit of 46.6 million euros ($42 million) was down 90 percent from 467 million euros ($421 million) in the January-March period a year ago. The vendor's revenues fell 5 percent to 6.2 billion euros ($5.6 billion) from 6.5 billion euros ($5.9 billion) in the 2000 first quarter.
Responding to the company's slumping performance, Ericsson execs said they would cut up to 22,000 jobs, including 2,000 in its handset unit, to reduce annual costs by $2 billion. Those layoffs would reduce Ericsson's work force to less than 90,000.
Ericsson officials also said they expect the company to record a loss of 485 million euros ($437 million) in the second quarter (April-June).
"A general economic downturn and an abruptly slower telecom sector are affecting our customers as well as us," said Ericsson CEO Kurt Hellstrom. "With no signs of a short-term turnaround, we are adjusting to these challenging circumstances by reducing our cost base by more than [$2 billion]."
Ericsson's earnings per share dropped 89 percent to .007 euros (.006 cents). The company said it expects the mobile phone systems market to grow by 5 percent to 15 percent this year, down from 20 percent to 25 percent in 2000.
Conversely, Nokia made no plans to cut jobs following its quarterly report, although the company lowered its forecast for sales growth this year from between 25 percent and 35 percent to 20 percent.
Nokia reported an operating profit of 1.4 billion euros ($1.3 billion), a 4 percent increase from 1.3 billion euros ($1.2 billion) in its 2000 first quarter. Nokia's per-share earnings were up 10 percent to .22 euros (19 cents), ahead of analysts' expectations of .19 euros (17 cents). Nokia's revenues for January-March totaled 8 billion euros ($7.2 billion), up 22 percent from 6.5 billion euros ($5.9 billion) in the first quarter last year.
Ericsson's Infrastructure Lead Shrinking
Even while handset sales totals tumbled over the last two years, Ericsson relied on its market-leading wireless infrastructure operations to remain competitive with Nokia and other wireless technology vendors. However, Nokia cut into Ericsson's infrastructure market share in the first quarter, while continuing to extend its lead in the wireless handset market.
Nokia's network division reported a 35 percent increase in sales to 2 billion euros ($1.8 billion) from 1.5 billion euros ($1.35 billion) in the same period a year ago. Sales by Ericsson's telecom infrastructure business in the first quarter were up 13 percent to 4.9 billion euros ($4.4 billion) from 4.3 billion euros ($3.9 billion) in the 2000 first quarter.
In the handset market, Nokia's sales rose 20 percent to 5.8 billion euros ($5.2 billion) from 4.8 billion ($4.3 billion) in the 2000 first quarter. Ericsson's handset sales totals were down 52 percent to 788 million euros ($712 million) from 1.6 billion euros ($1.5 billion) in the year-ago first quarter.
The Bottom Line
Nokia's stronger financial performance makes it a better ally than Ericsson for wireless operators planning to build third-generation networks and make other infrastructure moves. With more wireless operators needing vendor financing for those projects, Nokia's healthy treasury will help it land more customers. Future earnings reports from are likely to show still less distance between Ericsson's infrastructure revenues and those of its Finnish competitor. <<
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