Telco giants show it's tough selling 5G kit right now
Ericsson straps in for rough year, while Nokia bets on recovery in second half
Telecom giants Nokia and Ericsson both saw sales drop for the final quarter of 2023, blaming tough economic conditions for weak network operator spending. While Ericsson expects another tough year ahead, Nokia is banking on things picking up later this year.
Nokia, headquartered in Finland, revealed today that net sales fell 23 percent year-on-year in calendar Q4 to €5.7 billion ($6.19 billion). Operating profit was down 38 percdent to €547 million ($549 million).
The "significant improvements" Nokia saw in its Mobile Networks & Cloud and Network Services divisions were offset by a lower contribution from Nokia Technologies.
President and CEO Pekka Lundmark said there was a shift in customer behavior last year, driven by the economic environment and high interest rates, which led to Nokia's full year net sales declining by 11 percent to €22.25 billion ($24.1 billion).
For Q4, a slowdown in demand for network kit drove the sales decline of 23 percent, but Lundmark said Nokia saw "a significant improvement in order intake in the fourth quarter, particularly in Network Infrastructure, indicating at least some improvement in the overall spending environment."
Nokia saw "good progress" in US government initiatives in Fixed Networks, and the company expects those programs to benefit net sales in the second half of 2024 and into 2025, according to Lundmark. Q4 also saw the signing of "a new and significant customer" in Asia for Fixed Wireless Access products, he claimed.
Lundmark sounded an upbeat note on the near future outlook.
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"We expect the challenging environment of 2023 to continue during the first half of 2024, particularly in the first quarter. However, we are now starting to see some green shoots on the horizon, with improving order intake for Network Infrastructure and some of the specific deals we have won," he said.
That Nokia should seem the more optimistic of the two giants seems ironic, given the news in December that US telecoms operator AT&T had chosen Ericsson for a $14 billion contract to upgrade its infrastructure with open radio access network (Open RAN) technology. AT&T accounted for up to 8 percent of Nokia's mobile sales in 2023.
Nokia seeking to cut costs last year, partly through laying off 14,000 staff, as The Register reported at the time, equating to a 10-15 percent reduction in personnel.
Sweden's Ericsson earlier this week reported a 16 percent drop in revenue to SEK 71.9 billion ($6.9 billion) in its calendar Q4, off the back of a 23 percent dive in Network sales.
"As a result of focused execution and increased resiliency, we were able to adapt in a challenging environment and delivered solid Q4 results," Ericsson president and CEO Börje Ekholm.
Networks division sales were down as customers continued to focus on cash flow rather than investing in 5G, he claimed. However the CEO highlighted that Ericsson met it target to at least breakeven in Cloud Software and Services. Enterprise sales grew 7 percent year-on-year, mainly driven by Enterprise Wireless Solutions.
"While the actions we have taken to improve performance are paying off, we are not satisfied with our profitability and there is more work to do. As we look to 2024, we expect the market outside China to further decline, with similar uncertainties as experienced in 2023," Ekholm said.
Ericsson pulled the plug on nearly 10,000 workers last year. ®