Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

Nokia Siemens Networks (NSN), a 50-50 joint venture between Nokia Corp. (NOK - Analyst Report) and Siemens AG (SI - Analyst Report) to provide telecom network infrastructure solutions, reported strong financial results in the fourth quarter of 2012. Total revenue at Euro 3.99 billion was up 5% year over year and 14% sequentially. Quarterly gross margin of 36% was a huge improvement over 29.2% in the year-ago quarter and 32.2% in the previous quarter. Moreover, fourth quarter operating margin surged to 14.4% compared to just 4.6% in the prior-year quarter.

We believe the improvement in the top line was primarily spurred by encouraging result in the lucrative North American region, which was the weakest spot of the company. Quarterly sales were up 45% year over year to Euro 426 million in this region. The primary reason is the company’s acquisition of 3G/4G CDMA network gear businesses of Motorola Solutions Inc. (MSI - Analyst Report), which gave it a solid foothold in North America.

On the other hand, the bottom line was benefited by a massive restructuring initiative, which started in 2012. NSN has decided to reduce its headcount by 17,000, which is expected to result in an annual cost reduction of approximately $1.35 billion by 2013. In 2012, the company laid off 15,300 employees. Additionally, divestitures of non-lucrative segments, such as microwave-transport and fixed-line broadband-access businesses helped the company to concentrate on its core business of wireless and fiber-based networks.

Despite being the second largest company in this field after LM Ericsson AB (ERIC - Analyst Report), NSN always remains in sticky wicket since its formation in 2007. Massive competitive threats from low-cost Chinese network infrastructure vendors become a matter of concern for NSN. Huawei and ZTE are fighting neck and neck with NSN to capture the global market share. Consequently, the company became marginalized in the battlefield due to the introduction of more efficient and price effective equipments from Ericsson, Huawei and ZTE. 

Meanwhile Nokia and Siemens failed several times to sell NSN to private equity groups. After that, both the companies toyed with the idea of a spin-off of NSN as a separate, standalone entity in an IPO. Notably, the agreement between Nokia and Siemens for NSN will come to an end in 2013. However, to conduct a successful IPO, NSN must first set its business in order with sequential profitability and future growth projection.

At present, both Nokia and Ericsson have a Zacks Rank #1 (Strong Buy), while Siemens has a Zacks Rank #2 (Buy) and Motorola Solutions has a Zacks Rank #3 (Hold).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
GENERAL FINA GFN 8.20 +5.67%
QIHOO 360 TE QIHU 91.57 +4.38%
VIPSHOP HOLD VIPS 140.01 +3.49%
INVESTMENT T ITG 19.16 +3.34%
VERTEX ENERG VTNR 7.38 +3.07%