The mobile phone market has been good to both Nokia and LM Ericsson with both companies reporting good growth.
Stockholm-based Ericsson posted net income for the second quarter of US$746m, a 15% increase on the same period last year, on revenue that rose 18% to$4.9bn. For the first six months, it posted net income up 35%, at $1.3bn on revenue that increased 15%, 8.9bn.
Ericsson splits revenue into three segments: mobile networks, fixed networks and professional services, and while the first is the lion’s share of the overall figure (79% for the quarter and 80% for the first half), the strongest growth is in professional services, which was up 18% in the first six months of the year at SEK10.7bn ($1.37bn).
This reflects the growing emphasis Ericsson is putting on networking outsourcing in recent months, persuading carriers to let it run their networks while they concentrate on product development, sales and marketing.
The company was so buoyed by its performance last quarter that CEO Carl-Henric Svanberg upped his forecast for the whole year to “high single digit” growth from the 2%-5% previously predicted.
Nokia also posted healthy growth in both its top and bottom lines: net income for the quarter came in up 15%, at $972m, on revenue that rose 25% to $9.8bn. For the first half, the Finland-based company published net income up 15%, at $2.8bn on revenue that increased 21% to 15.4bn euros $18.8bn.
Despite these respectable figures, the company said profits may come be lower for the present quarter, a situation which reflects the overall changes underway in the mobile handset market.
The “Tale of Two Telecoms Giants” comparison is really no longer a fair one, because Ericsson gave up trying to go it alone in mobile handsets and spun out that business into the Sony Ericsson affiliate, which now contributes to the group’s bottom line but not its revenue.
Unlike Ericsson, Nokia is primarily a handset manufacturer, with its network equipment business, contributing just under 20% of its first-half revenue. It offers both basic mobile phones and smart phones (i.e. ones with an extensible operating system to which third-party apps can be downloaded), and indeed, the latter, more expensive devices are doing well, showing 89% growth in revenue for the quarter $1.67bn and 70% for the first half to $3bn.
Nonetheless, the largest contributor to revenue is clearly its basic feature phone business representing 60% of total revenue for the first six months, and the trend there is, says Nokia, for average price per unit to drop, thanks to increased competition from Asian manufacturers.