With merger pending, analysts see Nokia turning up the heat on Ericsson
Nokia on July 30 reported impressive gains in net sales, gross profit and other key performance indicators ahead of a planned merger with Alcatel-Lucent, which is steadily clearing regulatory hurdles.
Nokia grew net sales from $3.21 billion to $3.54 billion, up 9% compared to the same quarter in 2014.
Nokia CEO Rajeev Suri said software sales and core network sales both improved year-over-year.
“While we expect the telecom infrastructure market to remain challenging, I believe that our disciplined operating model and strong execution capabilities will continue to differentiate us in this environment. Additionally, we remain highly focused on reducing costs and improving efficiency in order to mitigate the impact of market conditions.”
Suri concluded: “Overall, with these results, we are well positioned to deliver on our full-year 2015 commitments.”
In April Nokia confirmed rumors that it is pursuing a $16.5 billion merger with Alcatel–Lucent in a bid to diversify its network infrastructure portfolio to include both wireless and wired tech.
Last month the U.S. Department of Justice gave the two companies the OK to continue with the planned merger.
Many telecom industry analysts have regarded the Nokia/Alcatel-Lucent merger as putting pressure on Swedish telecom equipment powerhouse Ericsson.
Bloomberg Business, in a July 30 report, pointed out that Nokia and Alcatel-Lucent have both passed Ericsson when considering gross margins.
“The rivals’ progress shows Ericsson CEO Hans Vestberg has his work cut out to help the Swedish company catch up,” Adam Ewing of Bloomberg wrote. “Vendors need to be consistently profitable to ensure they have the means for product development and marketing as they compete for contracts reaching billions of dollars from the likes of AT&T Inc. and Vodafone Group Plc.”
Analyst Pierre Ferragu, of Sanford C. Bernstein Ltd. in London, said Ericsson “need[s] to put their house in order – more focus and more efficiency.”
