Nokia fails to overtake Ericsson as network sales drop 6% in Q2

Nokia has failed to overtake rival Ericsson in sales as it reported 6 percent drop in networks business revenue in Q2.
Nokia networks sales Q2 2018Nokia said its networks business revenue reached EUR 4.693 billion or $5.5 billion in the second quarter of 2018.

Ericsson earlier said its Q2 revenue reached SEK 49.8 billion or $5.62 billion — primarily powered by its networks business. The difference between the networks business revenue of Nokia and full revenue of Ericsson is around $100 million. Huawei is the market leader in the global telecom equipment market.

The financial performance indicated that the ongoing turbulence faced by ZTE did not assist Nokia and Ericsson in a big way. ZTE has recently lost a major network deal to Ericsson to assist in the upgrade of radio equipment for Italy’s Wind Tre.

Finland-based Nokia showed poor performance than Ericsson in terms of sales growth during the quarter. The Sweden-based Ericsson posted 1 percent drop in Q2 2018 sales. For comparison, Nokia’s Q2 sales fell 6 percent.

Nokia generated EUR 2.055 billion (–5 percent) revenue from ultra broadband networks, EUR 1.326 billion (–8 percent) from global services and EUR 1.313 billion (–3 percent) from IP Networks and Applications during the second quarter.

Ericsson generated SEK 32.4 billion (+2 percent) from networks business, SEK 8.8 billion (–11 percent) from digital services and SEK 6.5 billion (–2 percent) from managed services in Q2 2018.

Nokia’s Networks business reported an operating profit of EUR 69 million with a gross operating margin of 34.8 percent.

Ericsson has reported SEK 49.8 billion or $5.62 billion and operating income of SEK 0.2 billion against SEK 0.5 billion operating loss with gross margin of 34.8 percent against 29.1 percent.
Nokia sales by region Q2 2018

CEO Comments

Both Nokia and Ericsson are betting on 5G network deals to improve revenue in coming years.

“Our view about the acceleration of 5G has not changed and Nokia is well-positioned for the coming technology cycle given the strength of our end-to-end portfolio. Our deal win rate is very good, with significant recent successes in the key early 5G markets of the US and China,” Nokia CEO Rajeev Suri said.

The North America 5G market is forecast to achieve CAGR of 77 percent and will be worth of 128 billion by 2025, says.

Nokia said the installed base of AirScale product, which enables customers to upgrade to 5G without a hardware swap, is growing fast.

“40 percent of sales pipeline is comprised of end-to-end deals. That is the highest level we have seen to-date,” Rajiv Suri said.

Reuters reported – before the Nokia result – that the industry has struggled since demand for the current generation of 4G mobile equipment peaked in 2015, but the Finnish company has forecast 5G roll-outs will start later this year in the United States, followed in 2019 by renewed buying cycles in Japan and South Korea.

Baburajan K