Recent financial results from telecom equipment manufacturers hint that an industry downturn may be coming. Huawei and Nokia reported financial results last week. Although both touted their positive achievements, the outlook is looking less rosy for them. Just the week before, Ericsson had both poor results and a negative outlook. The short term prospects for the telecom equipment manufacturers does not look encouraging.
Last Thursday, Nokia results were positive with flat sales, but a swing to profitability http://www.nokia.com/en_int/news/releases/2017/07/27/nokia-corporation-financial-report-for-q2-and-half-year-2017 However, Rajiv Suri, Nokia CEO, said “we expect our primary addressable market with communication service providers to be slightly more challenging in 2017 than earlier forecast. We now expect a decline in the market in the range of 3-5%, versus our earlier view of a low-single digit decline. In addition, we continue to expect our Networks sales to perform in line with the market.”
Generally, Huawei has been the star among telecom equipment manufacturers, slowly eating up market share from competitors. In results also announced last Thursday, overall sales for the first six months of the year were up 15%, to 283.1 billion ($42 billion) Chinese yuan, compared with the year-earlier period http://www.huawei.com/en/news/2017/7/Huawei-Announces-2017-H1-Business-Results But this is a dramatic deceleration from the year ago period, when sales were up 40%.
Earlier this month, Ericsson reported deteriorating sales and profits http://www.truepulse.com/ericsson-disappoints-2017q2-results/ Ericsson’s CEO Borje Ekholm was quite gloomy, “Considering the current market environment, the company position, and the more focused business strategy, we continue to assess risk exposure in ongoing contracts. Depending on the outcome, we see an increased risk of further market and customer project adjustments, which would have a negative impact on results, estimated to SEK 3-5 b (US$360-600million) for the coming 12 months.”
It’s too early to say that a downturn is coming for the telecommunications industry. Let’s hope that telecommunications industry executives are just trying to lower expectations.