Hello. I haven't heard about the Nextel deal. I thought that Nextel is specializing in this weird iDEN standard and thus buying their phones from Motorola. Since Nokia doesn't make iDEN phones, I don't quite see how they would hook up with Nextel. Apparently Nextel has had major quality problems with Motorola handsets, so they better think of something.
Nokia bought Ipsilon for 120 US$, Lisa. Apparently the company is now planning their next major aqcuisition in data communication field, Nokia is awash in cash, so there are plenty of options. Wish I knew something about IP switching. The whole Nokia network biz has changed so fast I haven't kept up. I don't really understand half the deals they closed last week (broadband ADSL, Actionet trunking system, etc.), but I'm glad they're moving the merchandise. I read someplace that Nokia's digital switches are able to handle twice the volume of Ericsson's, and that's nice.
Which brings me to Daniel. Actually, Nokia's network market share is now roughly half of Ericsson's, so I think that the growth rate difference of their businesses is starting to tell us something meaningful. I do agree that it's not fair to compare the growth rates of two companies if one of them has ten times larger sales volume.
Moreover, Nokia *is* taking away network share from Ericsson. During the last six quarters Nokia's average infrastructure sales growth has been around 40% and Ericsson's has been above 20%. No matter what is the growth rate of the market at large (and it happens to be 30-35%), this means that Nokia is gaining on Ericsson. Since Ericsson's growth has been below industry average and Nokia's has been above, E has lost overall share and N has gained. But you're right in stating that if both had beaten the industry average, both would have gained share. But in my mind there would still be only one real winner; the company who gains share most rapidly.
I just don't buy this "the growth is so fast there's enough room for everyone" line. No there isn't. The stark contrast between Nokia's and Ericsson's share price develoment in the last 20 weeks (+100% and +40%) reflects mostly the Wall Street's view that only one of these companies has the technological edge in mobile infrastructure. Ericsson cannot afford 25% growth rate in network division. Right now the stock price is propped up by their stellar handset sales growth. But this growth is slowing and Ericsson appears very vulnerable in the second quarter, their merchandise is simply outdated.
Besides, Ericsson is hawking all kinds of stuff from cordless phones to streetlight electronics to fixed line telephone networks which simply cannot grow at above 20% rate. So I do think that they suffer from elephantitis to some degree. Moreover, Nokia made a bigger profit than Ericsson in the last quarter than Ericsson, even though Ericsson is twice as big. This looks like a major profitability discrepancy.
Daniel, Nokia's new phones from 5110 up to 8810 and 9110 look like blockbusters. 6100 already is shaping up to be the biggest hit of the 1998 in this business. Ericsson made a major tactical misstep when they built their dual-mode phone on an old platform... Nokia is building its own model on 6100 technology and it will be a smash. I know your affinity to Ericsson, but I really think this is a good moment to ditch Ericy and load up on Noka. In 1999 everything might change again, Ericsson will introduce its own next-generation models and the balance migth shift. But for the next three quarters, we *are* facing the Schwarzenegger scenario.
Tero |
