NSN sees quarterly boost in profit but annual loss deepens

Infrastructure vendor Nokia Siemens Networks (NSN) has seen its operating profit for 4Q12 increase a staggering 275 per cent year on year. The €251m generated in the quarter dwarfed the €67m recorded in 4Q11, but the performance could not prevent the firm from seeing its annual loss slide to more than two and a half times as deep as 2011; from -€300m in 2011 to -€799m in 2012.

Net sales for the firm remained relatively steady for the quarter, increasing by five per cent year on year from €3.8bn to €4bn. Net sales for the full year, however, dropped two per cent year on year, to €13.8bn.

The firm added that is expecting to see at best, modest growth in 1Q13, due to the impact of competition, the first quarter being a seasonally weak quarter, the firm’s ongoing restructuring programme and the macroeconomic environment.

The firm is in the midst of a large restructuring programme to transform NSN into a “mobile broadband specialist”.

The firm announced plans to axe 17,000 jobs – almost a quarter of its 74,000 global workforce – and reduce operating expenses and production overheads by €1bn, compared with the end of 2011,by the end of 2013.

Kris Szaniawski, principal analyst at Informa Telecoms & Media, believes that despite the full-year performance comparing unfavourably to its performance in 2011, the signs are encouraging for the vendor.

“The last five quarters have been going in the right direction for NSN, and the second half of 2012 was much stronger than the first half,” he said. “For a company going through such an extensive restructuring process, the results are going in the right direction.”

He added that the firm could build on this performance in 2013, but there will be intensified pressure on its revenues.

“NSN has been ruthless cutting costs, and that is now showing – it’s doing well in terms of cost reduction, but there is more pressure on revenue now, and a narrower scope means more risk, as the company will now be dependent on growing revenue fewer markets.”

In December last year, the company reached an agreement to sell its business support systems (BSS) business to billing and charging software provider Redknee.

It has now divested seven of its “non-core” business units since announcing a restructuring of the company in November 2011.

It had already sold off its microwave transport business to DragonWave and its broadband access unit to US firm Adtran. A WiMAX operation acquired from Motorola in 2011 was also sold on in a back to back to deal to NewNet Communication Technologies. The vendor’s IPTV and Expedience units have also been sold.

NSN has also announced plans to offload its optical networks business to investment firm Marlin Equity Partners; Optical Networks had not previously been identified as a non-core business. There are three further units that NSN has identified as being non-core: Perfect Voice, the firm’s fixed line VoIP offering; Narrowband and Carrier Ethernet.