Saturday, 25 April 2015 20:54

Nokia, Alcatel Lucent, Huawei and Ericsson – a general glance

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On 14 of April the Finnish based Nokia responded to some long lasted media speculations with official statement, that the company (Nokia) is in advanced negotiations for full merger with the French based Alcatel-Lucent. Following their development the preceding major reorganizations in the companies’ history were the merger of Alcatel with Lucent Technologies (2006) and the joint venture between Nokia and Siemens AG (2007), known as Nokia Siemens Networks. Subsequently Nokia bought the Siemens AG stake of the joint venture (July 2013) and sold its mobile phone business to Microsoft (September 2013).

Anyway, since the current 15,6 billion € takeover is the biggest in the Finnish history and once Nokia Corporation was the mightiest Finnish company counting for about 4% of the country’s GDP, let me try to give you a small comparison of what the mighty Nokia was compared to today and what it is intended to be through the current merger and its prime rivals, the Swedish Ericsson and the Chinese Huawei.

For that let me take the year before the financial and the consequent economic crisis 2008, which looking backwards seems to be the starting point of the downhill for the company. Then the Finnish giant and the global mobile market leader (market share of over 40%) made turnover of 50,7 billion €, had a balance sheet of 39,6 billion € and personal of 125 829 people. Today, as of 31.12.2014, the restructured Nokia has a turnover of 12,7 billion €, balance sheet of 21,1 billion € and personal of   61 656 people. So let’s see how the latter stands against its current prime rivals.

31.12.2014

Turnover €bn

Balance €bn

Staff

Gross margin %

Net income/loss €m

Equity ratio %

Huawei

38.24

41.11

150000*

44.2

3696

32.3**

Ericsson

24.28

31.26

118055

36.2

1232

49.5

Alcatel Lucent

13.20

21.50

52673

33.4

-118

12.6**

Nokia

12.70

21.10

61656

44,3

1163

49.1

Source – the annual accounts of the above companies at 31.12.2014 or their pro forma.

* for 2013

** Calculated on the basis of the balance sheet, the calculated by the firm ratio may differ

*** CNY/EUR exchange rate 0.1327 and SEK/EUR rate 0.1065 (31.12.2014)

Even though Huawei has not yet reached the mighty years of Nokia, as seen from the table by net sales it tops the ranking, as of course one should not forget that the Chinese firm has a wider product portfolio than the listed competitors. Although the situation remains unchanged if we take only the carrier business (the direct competitor of the other firms), which for 2014 amounts to 66,7% of the net sales (25,5 bn€). Hence the combined sales volume of the new Nokia-Alcatel Lucent merger comes really close to the edge of its rivals.

Then it might be interesting to note that compared by gross margin profitability Nokia (44,3%) and Huawei (44,2%) achieve almost equal results as Alcatel Lucent comes as underperformer (33,4%) and the only net loss (-118 m€) generating firm. The latter is a matter where many industry analysts point their hesitations, whether Nokia will be able to successfully merge the French-American enterprise into profitable venture, while keeping ahead with the competition and the technological developments!? Following that way of thoughts I intentionally took or calculated a measurement of solvency, such as the equity ratio where clearly Alcatel Lucent is the under performer or the most indebted firm, due pretty much to the accumulated during the years losses.  

I personally wish success to the new enterprise and since for years Nokia was the pride of the Finnish economy, let me try to bring in light some dimension resembling a measurement of local significance. According to YLE (http://yle.fi/uutiset/nokias_alcatel-lucent_merger_largest_corporate_acquisition_in_finnish_history/7931413) the sales volume of the new merger, sales of about 26 bn €, will equal about a half of the Finnish state budget. So may both of the them grow healthily.

Kind regards, Rosti

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