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Home > Computers and Information Technology > Networking > Networks
The State of a Union: Nokia Siemens at 1 Year Old
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| Published Date:
June 2008
Published By:
Yankee Group
Page Count:
3
Order Code:
R388-2611
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Expected (and unexpected) organizational integration challenges have created a slow initial return on investment for the joint venture’s two stakeholders. In conjunction with this, an industry-wide slowdown in the communications network infrastructure market has led to lower expectations and a reassessment of what are reasonable goals for Nokia Siemens. Faced with expected mature industry gross margins for Tier 1 vendors of roughly 30% to 35 % or lower and opex levels in the 27% to 33 % range, the company has had to reduce its expectations in terms of profitability. Similar to peers such as Alcatel-Lucent and Ericsson, less than 5% EBITDA is now the realistic benchmark for NSN.
Yet it is not all doom and gloom by any stretch of the imagination. The complementary product portfolio that brought the joint venture (JV) together still remains. A professional services business that represents roughly one-third of the company has excellent market traction and can create potential new revenue opportunities for the infrastructure business. The wireless infrastructure business continues to thrive, with a 28.8% global market share in the fourth quarter of 2007. The acquisitions of Atrica and Apertio offer strong opportunities to fortify the portfolio. So with Nokia Siemens’ first year in the rearview mirror, it’s time to take a step back and assess where the company is at, how it has performed for its parents and what to expect going forward.
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