Telecom equipment vendors report Q2 results

Large telecom equipment providers have started to report financial results from the second quarter of 2011. Overall, all companies posted an increase in revenue from the year-ago quarter, although some companies revenue declined from the first quarter of 2011. A major contributing factor to many vendors success was a strong smartphone market. Other companies, such as Ericsson, didn’t perform as well as expected due to strong currency rates and restructuring charges.


Alcatel-Lucent (Paris, France) performed well in the second quarter of 2011, reporting revenue of $5.6 billion, up 2.4% from $5.5 billion in the year-ago quarter. Revenue was up 4.4% from the first quarter of 2011, when the company reported total revenue of $5.39 billion.

“We are on track for the year. In the second quarter, our next-generation product sales increased sharply, delivering market share gains in IP and optics, driven by the need for capacity and all-IP network transformation,” said Ben Verwaayen, CEO of Alcatel-Lucent. “We are reaffirming our full-year outlook to grow faster than our addressable market with an adjusted operating margin above 5% of our 2011 sales.”

The company’s gross margin was down slightly from the year ago quarter, from 36.1% in the second quarter of 2010, to 35.8% in the second quarter of 2011. According to Alcatel-Lucent, the year-over-year decline was due to “geographical and product mix and currency impart partly compensated by volume growth.”


Qualcomm Incorporated (San Diego, Calif., U.S.A.) reported results for its third quarter, which ended on June 26, 2011. Revenue in the third quarter of 2011 was $3.6 billion, down 6% from $3.9 billion in the second quarter, but up 34% from the year-ago quarter, when it posted revenue of $2.7 billion.

The company’s quarterly net income was $1.4 billion, up 35% from $767 million in the year-ago period.

Qualcomm shipped a total of 120 million units of CDMA-based mobile station modems, and predicts future growth in these shipments.

“Looking forward, we continue to see healthy growth in CDMA-based device shipments of approximately 18 percent in calendar year 2011,” said Paul E. Jacobs, chairman and CEO of Qualcomm. “We are pleased to be raising our revenue and Non-GAAP earnings guidance for the fiscal year, driven primarily by strong global smartphone adoption and the addition of Atheros.”

Qualcomm completed its acquisition of Atheros Communications in May for $3.1 billion.

The company increased its revenue outlook for the fourth quarter from $3.86 billion to $4.16 billion.


Despite a 14% year-over-year increase in revenue, from $7.4 billion in the second quarter 2010 to $8.56 billion second quarter 2011, Ericsson’s (Stockholm, Sweden) sales were hurt by the strong SEK, as well as large restructuring charges. According to the company, Q2 numbers included $265 million in restructuring charges, of which $203 million related to reduction in staff in the Swedish market.

According to Ericsson, this will result in a run-rate reduction with full impact in the fourth quarter 2011.
The company estimated a pay-back time of two and a half years.

In the report for the fourth quarter 2010 it estimated restructuring charges for 2011 of approximately $312 million, but is now estimated at approximately $468 million due to the larger scope of the reductions in Sweden.

Ericsson experienced a growth of 107% in India compared to the year-ago quarter, but decreased 12% from the first quarter of 2011. According to Ericsson sales were driven by 3G deployment, but 3G rollout has reached a “temporary peak” in the market.


Last week ZTE (Shenzhen, P.R.C.) announced its financial results for the first half of 2011. The equipment provider saw a 21.6% year-over-year increase in operating revenue from $4.5 billion to $5.8 billion in the first six months ending June 30, 2011.

ZTE reported a net profit of $120.3 million, down 12.4% from the same period last year when it posted a net profit of $134.88 million. According to ZTE, the fall in profit was due to a market share expansion strategy, product restructuring and pending software VAT refund subsidies.

The equipment provider’s revenue from international markets was $3.2 billion, up 36.4% year-on-year. The international market accounted for 55.7% of ZTE’s operating revenue.

ZTE shipped 60 million terminal products, including 5 million smart terminals in the first six months of the year. This is a 400% increase year-on-year in smart terminal sales.


Huawei (Shenzhen P.R.C.) reported a sales revenue growth of 11% year-over-year to $15.4 billion in the first six months of 2011. Operating profit reached $1.9 billion.
The equipment provider has no plans to alter its target for the year.

"Although the global economy continues to face uncertainty, we remain confident in achieving our annual sales target of $31.2 billion with our Device and Enterprise businesses as new growth drivers," said Cathy Meng, chief financial officer at Huawei.

Huawei Device experienced strong growth during the first six months, with shipments up by 40% year-over-year to 72 million units. The handset business grew by over 100% with smartphones at the center of the growth.


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