Sanford Bernstein’s equipment analyst Pierre Ferragu today offers a compare and contrast between Alcatel-Lucent (ALU), Ericsson (ERIC), and the Nokia-Siemens Networks joint venture between Nokia (NOK) and Siemens AG (SI), observing that the latter two are relatively better shape because of their exclusive focus on wireless, not wireline, equipment.
Ericsson and NSN saw sales in Western Europe rise by double digits, on a percentage basis, in constant currency terms, in the first nine months of the year. Alcatel-Lucent saw sales decline “much in line with the depressed trend in the [European] region,” writes Ferragu. “operators are lowering spending in fixed in order to increase spending in wireless,” he concludes.
But Ericsson is also faring much better than NSN, with Ericsson’s sales climbing 24% per quarter, on average, the last three quarters, compared to an average 2% decline for Nokia-Siemens per quarter.
Ferragu concludes that “the impact of what is happening at the moment [at NSN] could be dreadful“:
Europe is 32% of sales of the JV (last twelve months) and is their more profitable and cash generative business [...] Not only do they lose scale to Ericsson and Huawei but they also lose profits and consume cash on what they defend, as the only way they can defend themselves is modernising their own footprint! The recent cash injection by both parents may mean people in charge see the problem coming through as well.
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