NSN more pessimistic than Ericsson on infrastructure spending

Nokia Siemens Networks today painted a different picture of the telecom infrastructure market than its competitor Ericsson did on Wednesday, reporting fourth-quarter sales declines across multiple key regions. While Ericsson CEO Carl-Henric Svanberg declared, “This is not a telecom crisis,” Nokia CEO Olli-Pekka Kallasvuo warned of a rapidly deteriorating economic climate and a contracting infrastructure market.

Weakness in the handset market was Nokia’s primary cause for worry as critical replacement phone purchases dry up and consumer confidence wanes. But Kallasvuo said the economic crisis is extending to the infrastructure market despite wireless operators’ investments to meet mobile broadband demand. Though NSN saw a 14% increase in sales for the fiscal year, spending pressure was evident in its final quarter. NSN’s revenues fell 5% year-over-year in the fourth quarter to 4.3 billion euro ($5.5 billion) as sales slumped in Europe, China and North America, leading to a $179-million loss. Furthermore, Kallasvuo said the lowered spending would continue this year, projecting a contraction of the global infrastructure market of 5% or more for 2009. Kallasvuo added that he expected NSN’s share of the overall market to remain constant, though.

“We expect it to be a difficult year, but we think NSN has the right focus and is executing well,” Kallasvuo said.

NSN’s fourth-quarter results were almost the mirror image of Ericsson’s. The world’s largest wireless equipment vendor reported a sales increase of 11%, and in areas where NSN faltered, Ericsson gained ground. While NSN’s sales dropped 18.5% in North America and 20% in Europe, Ericsson saw growth in both markets, particularly in North America, where it is building out both AT&T and T-Mobile’s high-speed downlink packet access (HSPA) networks. NSN is also working the T-Mobile contract, and last year it was named a vendor in Telus and Bell Canada’s new HSPA network, which is rolling out this year.

Though Svanberg didn’t make any projections for 2009, he generally painted a much rosier picture for the wireless infrastructure market than for wireline telecom, which NSN has a greater stake in with its optical division. “This is not a telecom crisis—this is a financial crisis that has turned into an economic slowdown,” Svanberg said Wednesday. “If we look at our own market, operators are in good shape…So far we’ve hardly seen any effect at all on mobile network investments. We’re seeing effects on the fixed side. People are abandoning their fixed-line phones, but they are keeping their mobiles.”

But Ericsson doesn’t appear to be taking its fourth-quarter success for granted. It also announced plans to cut 5000 staff from its networks groups. Svanberg said the move was part of its overall strategy to focus on fewer products and common platforms as wireless networks evolve into flat IP architectures, but Ericsson is accelerating that strategy as a precaution against a possibly worsening infrastructure market.