Revenue in the second quarter of 2015 improved sequentially for all companies except Nokia under the scope of study in the Communications sector.
Year over year, Cisco posted a 3% increase in revenue, Motorola remained flat and Ericsson and Nokia declined. However, the largest sequential increase in net income was reported by Nokia with an increase of 92.7%, followed by Motorola with 91.9%.
On a year-over-year basis, Nokia rebounded from a loss of US$35.5mn to post net income of US$384mn. Motorola Solutions also witnessed strong year-over-year growth in net income of 82.1%.
In the world of communications, the fastest growing technology is LTE (Long Term Evolution – 4G wireless broadband technology). Companies like Nokia are aggressively pursuing the launch and expansion of LTE. Global LTE subscriptions reached 755 million worldwide in Q2 2015. For the first time, LTE constituted 10.44% of the worldwide subscription total for all mobile technologies. Asia-Pacific’s (APAC) share of global LTE subscriptions at the end of the quarter stood at 51.2%, reaching 387 million subscriptions. North America remains the second largest LTE market with 198 million subscriptions, though its share was reduced to 26.2% compared with 42.4% a year earlier. Strong growth was seen in the Latin America and Caribbean region which now has over 22.5 million 4G/LTE subscriptions, more than 17.2 million higher than a year ago, the equivalent of a 324% annual growth. Strong LTE performance was also achieved in the Middle East which now has 23.7 million LTE subscriptions equating to growth of 194%. By the end of June 2015 China had passed 225 million LTE subscriptions, 63.5 million additions in Q2 2015 alone.1
Nokia’s sequential increase in operating profit in the second quarter 2015 was due to growth in both Mobile Broadband and Global Services. On a sequential basis, the increase in net income of more than 90% profit in Mobile Broadband was primarily due to a higher gross profit and lower operating expenses. Nokia Networks’ operating margin benefited from an increase in software sales in the second quarter 2015. The sequential improvement within Mobile Broadband was due to a higher proportion of software sales and, to a lesser extent, lower costs related to the short-term impact of strategic entry deals. The proportion of high-margin software sales in the Nokia Networks’ sales mix was approximately 5 percentage points higher in the second quarter 2015 compared to the first quarter 2015. Nokia Networks also signed an agreement to acquire Eden Rock Communications, LLC to boost its multivendor SON (Self Organizing Networks) radio optimization capabilities.
Motorola Solutions had net sales of US$1.4bn in the second quarter of both 2015 and 2014. Net sales in the second quarter of 2015 included the unfavorable impact of foreign currency fluctuations of US$53mn, primarily within Europe and Africa (EA), Asia Pacific (AP), and Latin America, partially offset by growth of US$42mn in North America. Profitability improvements were primarily driven by lower operating expenses as a result of cost savings initiatives, the favorable impact of foreign exchange rates on operating costs, and lower pension expenses. The earnings from continuing operations attributable to Motorola Solutions, Inc in Q2 2015 was US$150mn, compared to US$78mn in the second quarter of 2014.
Silver Lake intends to invest US$1bn in Motorola Solutions to accelerate the company’s growth of smart public safety solutions and services businesses through strategic partnerships, investments, and acquisitions. The deal is expected to close by the third quarter of 2015.
1Telelcompaper, Sep 2015