YOU ARE AT:BusinessComparing quarterlies: Ericsson vs. Huawei vs. Nokia

Comparing quarterlies: Ericsson vs. Huawei vs. Nokia

Huawei reports biggest gains, but doesn’t break out carrier sales

Operators in mature mobile markets are enhancing LTE networks to increase throughput and lower latency while also investing in next-generation 5G networks, which are poised for limited commercialization this year followed by more scaled deployments next year. However, even with the current 5G hype cycle, major network infrastructure vendors Ericsson and Nokia reported relatively flat sales, while Chinese rival Huawei, on the other hand, continues its growth trajectory.

In recent weeks, all three vendors announced Q2 2018 financial results, which paint a good picture of the competitive dynamic between the companies.

In the past year, Ericsson has cut some 20,500 positions, with more than 2,000 job cuts in the second quarter of this year. The workforce reductions are part of a plan to reduce costs by more than $1 billion.

“These are tough but necessary actions to ensure competitiveness,” President and CEO Börje Ekholm said. Noting run-rate savings, he said “the effect is gradually becoming visible in the earnings, mainly through lower service delivery costs and common costs…We will continue our efficiency activities throughout the year.”

Based on its financial reports, Ericsson’s total sales were down 1% compared to Q2 2018, although the networks segment saw a 2% increase year-over-year with the North American market driving that growth. Excluding restructuring charger, the operating margin for the networks segments was 13.3%.

Eckholm said the uptick in networks came from operators prepping to deploy 5G in the U.S. “Customers turn to new technology in order to manage growing demand for data with sustained quality and without increasing costs. This, together with fixed wireless access, represent the first business cases for 5G.

As he previously signaled, Nokia CEO Rajeev Suri this week said the network infrastructure vendor had a challenging first half of the year but expects a “more robust second half.” In a Q2 2018 earnings call, Suri highlighted that some 40% of the company’s sales pipeline consists of “end-to-end deals…That is the highest level we have seen to date.”

On a constant currency basis, net sales were down 1% year-over-year to about $6.2 billion. Specific to the Nokia Networks business group, net sales were flat year-over-year at approximately $5.5 billion. Suri reported an operating margin in the networks business of a “disappointing” 1.5%. “We have been open for some time about the fact that 2018 would be a year of margin pressure.” But, the executive noted a “clear path” to better performance in 2019 and 2020 “as the 5G super-cycle takes hold.”

After projecting a better H2, Nokia this week announced an end-to-end 5G supplier deal with T-Mobile US, which is valued at $3.5 billion and covers a three-year term.

Huawei didn’t break out business unit-specific financials but the company reported revenues of CNY 325.7 billion ($47.8 billion) for the first half of the year, an increase of 15% over the same period last year. The company’s operating margin for the first half of 2018 was 14%, up from 11% in the year-ago period.

Regarding its telco business, the company said, “Huawei continues to focus on leveraging its strengths in end-to-end 5G solutions, driving the continuous evolution of LTE – as well as Intent-Driven Networks, cloud data centers, and more – to help its carrier customers overcome practical business challenges. Ultimately, the shared goal is to help carriers future-proof their businesses by enabling All-Cloud networks, connecting more people and things, and building out network infrastructure.”

ABOUT AUTHOR

Sean Kinney, Editor in Chief
Sean Kinney, Editor in Chief
Sean focuses on multiple subject areas including 5G, Open RAN, hybrid cloud, edge computing, and Industry 4.0. He also hosts Arden Media's podcast Will 5G Change the World? Prior to his work at RCR, Sean studied journalism and literature at the University of Mississippi then spent six years based in Key West, Florida, working as a reporter for the Miami Herald Media Company. He currently lives in Fayetteville, Arkansas.