Nokia Solutions and Networks (NSN) saw third quarter 2013 net sales decline by 24.0% year-on-year to Euro 2.5bn (£2.2bn). The company attributed the drop to a seasonal reduction in wireless infrastructure deployment activity and the negative impact of foreign currency fluctuations.
Excluding divestments of businesses not consistent with NSN’s strategic focus, as well as the exiting of certain customer contracts and countries, net sales year-on-year declined by approximately 20%.
The year-on-year 22.5% decrease in sales (Euro 1.2bn/£1bn) in the Mobile Broadband division was primarily due to lower sales in WCDMA, GSM and CDMA. Within Mobile Broadband, LTE was approximately flat year-on-year as higher sales in North America, Europe and Latin America offset lower LTE sales in Japan and Korea. On a constant currency basis, NSN said its LTE net sales grew year-on-year.
The 21.8% year-on-year decrease in the Global Services division (Euro 1.3bn/£1.1bn) was largely due to a reduction in network implementation activity, which is consistent with lower levels of large scale Mobile Broadband deployments, and the exiting of certain customer contracts in line with NSN’s strategic focus.
Gross margin was 36.6% in the third quarter 2013, the second highest in NSN’s history, and an improvement of 4.2 percentage points from the third quarter 2012, primarily due to a higher gross margin in Global Services. Sequentially this represented a decrease of 1.8 percentage points from the second quarter 2013.
Profit was also hit by the downturn in activity. EBIT before specific items was Euro 217m (£185m) – a decrease of 36.7% yr-on-yr and down 35.6% on the previous quarter. Net profit was Euro 97m (£83m) – up 32.9% yr-on-yr and up 546.7% on Q2 2013’s result of Euro 15m (£12.8m).
Divisional operating profit saw Mobile Broadband drop 79.1% yr-on-yr to Euro 62m (£53m) – down 44.6% on Q2 2013, while Global Services was up 256.5% yr-on-yr to Euro 164m (£140m), although it was down 23.7% on Q2.
Rajeev Suri, CEO of NSN (pictured above), commented: “I'm delighted with NSN's continued strong performance in profitability and cash generation. In 2014, we will focus on strengthening our topline performance, with a particular focus on growth in LTE and Global Services.”
On 7 August 2013, Nokia Corporation announced that it had completed the acquisition of Siemens' stake in NSN, and as a result, NSN is now wholly owned by Nokia. The transaction was originally announced on 1 July 2013.
NSN is continuing its strategy to reduce its operating expenses and production overheads by more than Euro 1.5bn (£1.2bn) by the end of 2013, compared with the end of 2011. The restructuring programme is still expected to cost Euro 1.8bn (£1.5bn), as well as total restructuring related cash outflows of approximately Euro 1.6bn (£1.3bn).
The company is also continuing to pursue its reduction in headcount. At the end of the third quarter 2013, NSN had approximately 49,100 employees, a reduction of approximately 11,500 compared with the end of the third quarter 2012, and approximately 1,400 compared with the end of the second quarter 2013.
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