November 24, 2020

Nokia and Ericsson Announce Cost Cutting

BERLIN — The two largest European makers of telecommunications equipment, Nokia and Ericsson, announced plans on Thursday to continue or accelerate cost-cutting efforts in the face of rising competition, internal reorganizations and weak demand in North America.

Nokia, the largest seller by volume of mobile phones, said it planned to cut more than the €1 billion, or $1.43 billion, it had previously planned to trim from its operating expenses by 2013. The company, based in Espoo, Finland, did not specify a new target. It announced the new plan as it reported loss of €368 million in the second quarter.

Ericsson, the largest maker of telecom networking equipment, said it took a restructuring charge of 1.3 billion Swedish kronor, or $202 million, in the quarter, more than some investors had been expecting, to pay for layoffs in Sweden.

The separate announcements sparked heavy trading in shares of both companies in Europe.

Ericsson’s shares fell more than 10 percent, even though the company, based in Stockholm, reported a 60 percent increase in profit and 14 percent rise in sales.

Nokia’s shares rose more than 5 percent as investors welcomed the handset maker’s intention to increase its austerity measures. Nokia said its sales fell 7 percent in the three months through June to €9.275 billion from €10.0 billion a year earlier.

Pete Cunningham, an analyst in Reading, England at Canalys, a research firm, said Nokia’s sales decline stemmed from its difficulty selling smartphones in China that use its Symbian operating system. Nokia in February said it planned to progressively replace Symbian with Microsoft’s Windows Phone software starting later this year.

“This is obviously not good news from Nokia,” Mr. Cunningham said. “I think the appetite for Symbian devices has fallen away very quickly since Nokia made the announcement about moving to Microsoft in February. This shows they definitely need those Windows phones as soon as possible.”

Stephen Elop, the Nokia chief executive hired from Microsoft last year, said Nokia had replaced key sales executives, reduced inventories in China, revamped its handset-pricing strategy and refocused its retail marketing programs to compensate for the downturn.

“The challenges we are facing during our strategic transformation manifested in a greater than expected way in Q2 2011,” Mr. Elop said in a statement. “However, even within the quarter, I believe our actions to mitigate the impact of these challenges have started to have a positive impact on the underlying health of our business.”

Mr. Elop, during a conference call with analysts, reiterated that Nokia planned to sequentially introduce the first Microsoft devices later this year in various national markets. He did not say how many devices Nokia would introduce, or in which markets.

Nokia’s sales fell in all regions of the world except the Middle East and Africa during the quarter. The greatest percentage decline was in North America, where sales fell 61 percent to €88 million from €223 million a year earlier.

Ericsson shares fell sharply even as the company, which faces competition from the Chinese competitors Huawei, ZTE and the French rival Alcatel-Lucent, reported a 59 percent increase in second-quarter profit to 3.2 billion kronor from 2 billion kronor a year earlier.

Sales at Ericsson rose 14 percent to 54.8 billion kronor from 48.0 billion.

During an interview, Hans Vestberg, the Ericsson chief executive, said the company’s restructuring charge in the second quarter had been greater than expected but was part of the ongoing adjustment of its global business to meet the economic conditions.

“If you look at our numbers today, this is one of the strongest quarters of growth we’ve ever had,” Mr. Vestberg said. “We had a higher restructuring cost than expected but we did that to improve the profitability of the company going forward.”

Mr. Vestberg said demand for mobile networking equipment remained strong globally during the quarter, especially in Russia, China, Brazil and India. Sales rose by 70 percent in Russia, 96 percent in China, 17 percent in Brazil and 107 percent in India, as operators built high-speed mobile broadband networks for growing populations.

Sales of networking equipment in North America fell 6 percent in the quarter, which Mr. Vestberg attributed to the appreciation of the Swedish currency against the dollar. Mr. Vestberg said Ericsson planned to report about $300 million in restructuring charges this year.

With the announcement on Thursday, the company was two-thirds of the way toward its goal, he said.

Article source: http://feeds.nytimes.com/click.phdo?i=4f7a38abaef36e6db4c71d85f85ee7fe

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