Wireless infrastructure vendors can get through this rough economic time if they stay true to their core businesses, even as the economy continues to take financial hits.
The world’s largest infrastructure provider, L.M. Ericsson, continues to buck the trend and posted a strong fourth quarter. Nokia Siemens Network posted losses in the final quarter of 2008 and Nortel Networks Corp. has filed for bankruptcy. Alcatel-Lucent, which has posted seven straight quarters in the red, is planning to report its fourth-quarter results this week.
The outlook ahead is solid; spending in China is set to take off as 3G networks are built, and wireless providers overall continue to report profits.
“These companies need to stay focused,” said Nadine Manjaro, an analyst that follows the infrastructure market for ABI Research. “This year, companies have the opportunity to go through their product lines and eliminate the fat.”
Ericsson posted a profit for the second straight quarter but announced it would reduce its workforce by cutting 5,000 job and pay restructuring charges between $720 million and $840 million. For the fourth quarter, Ericsson netted sales of $7.9 billion in the quarter, and $24.8 billion for the year.
“To date, our infrastructure business is hardly impacted at all, but it would be unreasonable to think that this would be the case also throughout 2009,” Carl-Henric Svanberg, Ericsson CEO and president, said in a statement.
The company reported strong gains in Asia Pacific, Latin America and North America.
Manjaro said Ericsson has been able to remain strong because – unlike its competitors – it has not had to undergo costly mergers.
“Ericsson has remained a solid company,” she said. “The have remained focused.”
Nokia Siemens Networks reported losses in the fourth quarter due to charges from the company being formed by Nokia Corp. and Siemens of Germany in 2007. For the final quarter, NSN posted losses of $179 million. The company had to pay $152 million of intangible asset amortization and other purchase price accounting related from forming the company. NSN said it achieved its targeted cost-savings of 2.5 billion that was set for 2008.
NSN reported sales of $5.5 billion in the final quarter and $19.8 billion overall for 2008. Sales decreased 14% for the year when compared to 2007. The company’s overall operating loss for 2008 was $389 million. NSN reported losses of $1.6 billion in 2007.
Hope in China
Manjaro said Ericsson and NSN stand to gain from China’s 3G buildout.
“China will provide a bright light for Ericsson and Nokia Siemens Network,” she said.
Last December, the Chinese government said it would issue 3G licenses. Plans for the buildout include expenditures of up to $41 billion. China Mobile, China Unicom and China Telecom are expected to receive the licenses.
Ericsson has deals in place with China Unicom and NSN is working with China Mobile, Manjaro said.
Poised for growth in the U.S.
Carriers are also reporting growth in customers. AT&T Mobility had a better fourth quarter than rival Verizon Wireless.
“The carriers are still reporting they are doing well,” Manjaro said.
As for Alcatel-Lucent, Manjaro said the company may turn around its fortunes this year. In December, the company unveiled a new business plan. The company also plans to gain from the Chinese market, Manjaro said.
“Alcatel-Lucent has identified the problems and are working to address them,” she said.
As for Nortel, the Canadian company filed for bankruptcy last month and is getting out of the WiMAX business.
There has been wide speculation on how the company will move forward, and as a result of the filing, Nortel’s stock has been suspended from the New York Stock Exchange.
Manjaro does not expect Nortel’s competitors from having to seek protection through bankruptcy.
“If the companies focus on their core business, they will make it though 2009 and 2010,” she said.
