Nokia Siemens Networks (NSN), a leading telecom equipment
vendor, predicts a flat growth in the mobile broadband market,
inspite of continuous data traffic growth. Formed in 2007, as a
50-50 joint venture between
), NSN is currently the third largest global telecom equipment
Espoo, Finland-based NSN expects the broadband market to
remain challenging in 2013 as operators around the world keep a
tight control on their capital spending and operating expenses.
However, the European vendor targets a 5-10% operating margin
growth over a long-term period.
NSN has been going through a tough time, as sales have
declined mainly due to competition from Chinese manufacturers.
The company also lacked severely on the CDMA front, which is the
most dominant network used in the lucrative North American
market. In its recently declared 2012 results, NSN has seen its
top line decline by 2%.
To overcome this difficult situation, the company is
concentrating on its core mobile broadband business and is
reducing its operating cost by retrenching employees and selling
its non-core business units. NSN plans to lay off 17,000 or 23%
of its work force and expects the restructuring to result in an
annual cost reduction of approximately $1.35 billion by 2013.
It seems that the restructuring measures have yielded positive
results as the company achieved its first ever operational profit
in the third quarter of 2012. The positive news continued as
sales in North America also soared by 20% last year, thereby
increasing pressure on arch rival
Alcatel Lucent S.A.
Telecom carriers around the world are investing in network
upgrade mostly in Long Term Evolution (LTE) to support massive
demand for mobile data and video. NSN has been part of this
growth story and has only come second to industry leader
), in gaining LTE contract. In the fourth quarter of 2012,
NSN has won contracts worth $451.40 million.
Inspite of these positive news, we believe that the
macroeconomic uncertainty in the developed markets remain a
concern for the company as carriers could reduce their
infrastructure spending to tide over the difficult situation.
Nokia, currently carries a Zacks Rank# 3 (Hold).
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