The top three companies in the wireless infrastructure market all posted revenues in the billions, but only one came out on top in turning a profit for the third quarter.
The world leader in market share, L.M. Ericsson, surprised investors as the company posted $6.5 billion in revenue and an operating income of $763 million for the quarter.
“Ericsson did better than I though they would,” said Nadine Manjaro, a senior analyst with ABI Research. “Alcatel-Lucent and Nokia Siemens Networks are still struggling from their mergers.”
Nokia Siemens Networks and Alcatel-Lucent, who rank two and three behind Ericsson, posted revenues of $4.4 billion and $5.2 billion for the quarter. However, restructuring charges hurt the bottom line for both companies. Nokia Siemens recorded a third-quarter operating loss of $1.2 million and Alcatel-Lucent reported a net loss of $51 million.
The French-U.S. company was the last to share its earnings for the quarter, releasing its results last Thursday. Ericsson and NSN released earnings for the quarter about a week earlier.
Alcatel-Lucent’s new leadership vows to return the world’s largest telecommunications equipment maker to profitability. Since the $11.4 billion merger between Alcatel SA and Lucent Technologies Inc. in 2006, the company has posted seven quarters of losses.
The company has suffered from internal clashes and stiff competition from Ericsson, NSN and Huawei Technologies Co. in the wireless infrastructure market. In September, Philippe Camus replaced Serge Tchuruk as chairman and Ben Verwaayen replaced Patricia Russo as chief executive.
Verwaayen said he has a plan that he will unveil later this year aimed at turning around the company’s fortunes.
“Our profitability remains unsatisfactory,” Verwaayen said in a statement.
Verwaayen said, however, that the company is in good shape from a cash standpoint and met its revenue guidelines for the third quarter.
In the quarter, revenues declined 6.6% from a year ago and 0.9% when compared to the second quarter. For the third quarter a year ago, the company had $5.5 billion in revenue.
Carrier revenue declined 9.4% and the company saw spending decline by customers in developed markets. Alcatel-Lucent posted gains in enterprise revenue, up 6.3%, and services, up 16.6%.
“We continued to grow our enterprise business at a healthy rate and saw accelerated growth in services,” said Verwaayen, former CEO of BT Group PLC.
The company’s adjusted operating profit for the quarter was $51 million compared to $89 million the company posted in the third quarter in 2007.
For the final quarter of the year, the company is projecting that the global telecommunications equipment and related services market to be flat. Based on the outlook for the fourth quarter, the company continues to expect its year-end net debt to be materially reduced compared to the level at the end of June of this year.
Nokia Siemens down
Like Alcatel-Lucent, Nokia Siemens Networks continues to pay charges stemming from the creation of the company. NSN was formed in April 2007. For the third quarter a year ago, NSN posted a loss of $152 million, largely due to restructuring charges.
According to its third-quarter results, NSN experienced a decline in business on every continent compared to a year ago. The largest decline occurred in China,. where $364 million in sales was reported, a decrease of 22%. The company also saw sales drop about 10% in Latin America and Europe, which remains its largest market posting $1.6 billion in sales for the quarter.
The company’s smallest market in terms of sales remains North America, where it posted $190 million in revenues, about a 1% decrease from the same time one year ago. However, Nokia officials expect for NSN to maintain its No. 2 position in the infrastructure market as it moves forward in the final quarter of this year and into 2009.
ABI’s Manjaro said she expects 2009 to be strong for the three companies, even in the economic climate.
“Overall, the large vendors have not been impacted,” she said. “Operators and vendors are not cutting back. They continue to push out equipment.”
Manjaro said the companies will benefit as operators gear up to launch LTE, a fourth-generation network.