Nokia Siemens Networks (NSN), a 50-50 joint venture between
) 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
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.
), 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
), 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
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
MOTOROLA SOLUTN (MSI): Free Stock Analysis
NOKIA CP-ADR A (NOK): Free Stock Analysis
SIEMENS AG-ADR (SI): Free Stock Analysis
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