Smartphone sales continued to erode feature phone market share in Q2'13. Worldwide smartphone sales to end users reached 225mn units, up 46.5% from Q2'12. Worldwide mobile phone sales to end users totaled 435mn units, an increase of 3.6% from the same period last year. Worldwide sales of feature phones declined 21% YoY, totaling just 210mn units.1
Slowing demand of feature phone sales across many markets worldwide, and fierce competition in the smartphone segment, affected Nokia’s mobile phone sales in Q2'13. Nokia’s mobile phone sales totaled 61mn units, down from 83mn units a year ago. Nokia’s Lumia sales grew 112.7% in Q2'13 due to its expanded Lumia portfolio, which now includes Lumia 520 and Lumia 720. With the recent announcement of the Lumia 1020, Nokia has built a wide portfolio of devices at multiple price points, which should help boost Lumia sales in the second half of 2013. However, Nokia is facing tough competition from Android devices, especially from regional and Chinese manufacturers with more aggressive price points.1
Sales of equipment for fiber-optic networks surged 27% sequentially in Q2'13, driven by the improving North American market and demand for 100-Gbps technology overall. The WDM (wavelength-division multiplexing) equipment segment was up 21% YoY driven by acceleration in North American 100G deployments, and worldwide spending on 100G to close to 15% of all optical spending.2
The transition from TDM to packet and rising video traffic are currently the main growth drivers for routers and carrier Ethernet switches (CES) market share. With the US economy slowly improving, and a number of large operators in the Euro zone indicating new spend, analysts expect the router and CES market to grow at an 8.8% CAGR through 2017.3
Communications sector companies in the analysis announced and completed a number of acquisitions and divestitures in Q2'13.
Cisco completed its acquisition of privately held Ubiquisys Limited, a provider of intelligent 3G and long-term evolution (LTE) small-cell technologies designed to provide seamless connectivity across mobile heterogeneous networks for service providers. The company also completed its acquisition of privately held JouleX, Inc. a leader in enterprise IT energy management for network-attached and data center assets. Additionally, Cisco completed its acquisition of SolveDirect Service Management GmbH, a privately held company headquartered in Vienna, Austria that provides innovative, cloud-delivered services management integration software and services.
Cisco announced its intent to acquire privately held Composite Software, Inc., a company in data virtualization software and services. Cisco also announced a definitive agreement to acquire Sourcefire Inc., a provider of intelligent cyber-security solutions.
Demonstrating commitment to realign its business around core areas of focus, Ericsson announced numerous acquisitions and divestitures in Q2'13:
On July 1, 2013, Nokia Corporation and Siemens AG announced they have entered into a definitive agreement pursuant to which Nokia will acquire Siemens' entire 50% stake in their joint venture, Nokia Siemens Networks. The purchase price for Siemens' stake is €1.7bn and the transaction is expected to close during the third calendar quarter of 2013.
Nokia’s revenue continued to decline in Q2'13 and the company registered a 21.8% drop YoY. While there is strong demand for its Lumia series, overall mobile phone volume continued to decline. Motorola Solutions also reported a marginal decline in revenue as both its business segments, Government and Enterprise, registered lower sales. But all was not negative, Cisco and Ericsson registered positive YoY revenue growth of 6.2% and 5.9% respectively.
Communications companies in the analysis reported profit improvements this quarter vis-à-vis the same period last year. This was primarily driven by companies’ efforts to bring down operating expenses. Market cap at the end of Q2'13 grew for Cisco and Nokia while it declined for Motorola Solutions and LM Ericsson against the previous quarter.