NSN Shows Signs of Turnaround - Analyst Blog
25 Gennaio 2013 - 11:00AM
Zacks
Nokia Siemens Networks (NSN), a
50-50 joint venture between Nokia Corp. (NOK) and
Siemens AG (SI) to provide telecom network
infrastructure solutions, reported strong financial results in the
fourth quarter of 2012. Total revenue at Euro 3.99 billion was up
5% year over year and 14% sequentially. Quarterly gross margin of
36% was a huge improvement over 29.2% in the year-ago quarter and
32.2% in the previous quarter. Moreover, fourth quarter operating
margin surged to 14.4% compared to just 4.6% in the prior-year
quarter.
We believe the improvement in the
top line was primarily spurred by encouraging result in the
lucrative North American region, which was the weakest spot of the
company. Quarterly sales were up 45% year over year to Euro 426
million in this region. The primary reason is the company’s
acquisition of 3G/4G CDMA network gear businesses of
Motorola Solutions Inc. (MSI), which gave it a
solid foothold in North America.
On the other hand, the bottom line
was benefited by a massive restructuring initiative, which started
in 2012. NSN has decided to reduce its headcount by 17,000, which
is expected to result in an annual cost reduction of approximately
$1.35 billion by 2013. In 2012, the company laid off 15,300
employees. Additionally, divestitures of non-lucrative segments,
such as microwave-transport and fixed-line broadband-access
businesses helped the company to concentrate on its core business
of wireless and fiber-based networks.
Despite being the second largest
company in this field after LM Ericsson AB (ERIC),
NSN always remains in sticky wicket since its formation in 2007.
Massive competitive threats from low-cost Chinese network
infrastructure vendors become a matter of concern for NSN. Huawei
and ZTE are fighting neck and neck with NSN to capture the global
market share. Consequently, the company became marginalized in the
battlefield due to the introduction of more efficient and price
effective equipments from Ericsson, Huawei and ZTE.
Meanwhile Nokia and Siemens failed
several times to sell NSN to private equity groups. After that,
both the companies toyed with the idea of a spin-off of NSN as a
separate, standalone entity in an IPO. Notably, the agreement
between Nokia and Siemens for NSN will come to an end in 2013.
However, to conduct a successful IPO, NSN must first set its
business in order with sequential profitability and future growth
projection.
At present, both Nokia and Ericsson
have a Zacks Rank #1 (Strong Buy), while Siemens has a Zacks Rank
#2 (Buy) and Motorola Solutions has a Zacks Rank #3 (Hold).
ERICSSON LM ADR (ERIC): Free Stock Analysis Report
MOTOROLA SOLUTN (MSI): Free Stock Analysis Report
NOKIA CP-ADR A (NOK): Free Stock Analysis Report
SIEMENS AG-ADR (SI): Free Stock Analysis Report
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