Posts Tagged ‘Financials’
Yesterday, both Nokia and Samsung announced dismal Q4 results due to the worldwide economic woes. Nokia announced their quarterly profits fell by 53% year over year from €2.6 billion in 2007 to €1.2 billion in 2008. Nokia’s market share fell from 40% in Q4 2007 to 37% in Q4 2008 which equals to 113 million units shipped in Q4. For 2008, Nokia shipped 305 million units, down 9% from 2007. The only bright spot in q4 for Nokia was its services and software sales which were up 37% to €158 million.
Samsung also reported a Q4 loss, its first ever since 2000. However, the loss was primarily due to its chips and LCD businesses. It mobile handset business actually grew in Q4 2008, posting an increase of 14% in sales over Q3 2008. However, its operating profit for Q4 was down by 69% over Q3. Samsung shipped approximately 200 million units in 2008 an increase of 22% over 2007. In Q4, it shipped 52.8 million units, an increase of 2% over Q3 2008 and 14% increase over Q4, 2007.
Sony Ericsson also suffered similar fate as Nokia and Samsung. SE shipped 24.2 million units in Q4 2008 which is 21% below Q4 2007 numbers. Its sales were consequently impacted and at €2.9 billion, were down by 23% over Q4 2007. It reported an operating loss of €262 million which is a 22% decline over Q4, 2007.
LG on the other hand had a great quarter fueled by solid demand in Europe and Asia. It shipped 25.7 million handset in Q4, 2008 which brought in $3 billion in sales revenue and reflect a sales growth of 40.3% YoY and 16% QoQ.
All companies expect Q1 2009 to be down by 5-10% from Q1 2008.
Sprint today reported its Q3 numbers and they were horrendous. It lost 1.3 customers during the quarter which reduced its revenue from $10.04 billion a year ago to $8.81 billion this quarter. This resulted in a quarterly loss of $342 million or 11 cents a share.
Sprint has been losing customers, almost a million every quarter for the last 3 quarters. At this rate, it is going to run out of money soon. Then the question arises as to what happens to it. It has tried selling its iDEN (legacy) network which has gone no where due to lack of buyer interest. Its investments in WiMAX has a while to go before they can pay off.
Sprint did take steps to reduce bankruptcy concerns for now by paying down some of its credit facility and increasing interest that it will pay on its new debt. However, that just buys its some breathing space for now. Falling ARPU down to $56 and shrinking customer base does not bode well for Sprint. With its burn rate of $7.8 billion a quarter and $4.1 billion in cash balance at the end of the quarter, it will end up using all of its $1 billion free cash flow in coming months. I think it is a matter of time and another shoe to fall before Sprint becomes an acquisition target or fails.
[Via New York Times]
Verizon today announced its Q3 results and they are looking good with strong growth in wireless division. VZ announced a 59¢ diluted EPS for Q3 from 44¢ diluted EPS in Q3, 2007. Its revenue grew 5.4% YoY. Wireless business saw the strongest growth, with 1.5 million new retail customers increasing the total customer base to 70.8 million. Its total wireless revenue was $12.7 billion of which data services accounted for $2.8 billion. VZ also reported lowest churn numbers with 1.33% total churn, while its ARPU climbed to $52.18 a month.
However, the biggest worry for VZ continues to be its debt which increased to $44 billion. It is at more than half of its market capitalization of $77 billion. Like its other telecom bretheren, it too suffers from up-front investment costs which are necessary to stay competitive. VZ continues to invest in wireless technologies and has also sped up its FiOS roll out to counter the 12% decline in its traditional wireline customer base.
Yesterday, AT&T announced some stellar performance numbers for the 3rd quarter 2008 led by growth in Apple’s iPhone 3G products. AT&T activiated 2.4 million iPhones during the quarter and their wireless data revenue grew to $2.7 billion. More recently, Apple also announced a great quarter with record sales of 6.9 million iPhones during the quarter. However, the future is very uncertain.
The end of last quarter saw the beginning of the economic downturn. We have already seen the effects of the downturn on Nokia which said its Q3 revenue fell by 7% from previous quarter. Sony Ericsson has also been affected by the downturn with their sales down 10% over previous quarter and profits down 1% over last quarter. No one knows how long it is going to last. As such all three companies mentioned above have lowered their forecast for the next quarter and the new year. That was expected, that is not the big story.
The bigger story is the profit squeeze that the Mobile sector is facing. Take for example AT&T which is considered the bellweather for this sector. As I mentioned earlier, its revenue grew impressively. However, it had to subsidize the iPhones heavily, to the tune of $900 million in the quarter which amounts to a 10¢ reduction in its earnings per share. Clearly, AT&T has to subsidize the iPhones to stay competitive with RIM Blackberry, T-Mobile’s G1 and Microsoft Windows Mobile based phones with various carriers including AT&T. However, it is going to get worse going forward as consumers reduce their spending and shun expensive plans. There is a danger that consumers might shun smartphones all together. As Sanford C. Bernstein analyst Craig Moffett said to BusinessWeek:
you wonder whether the iPhone runs any risk of tilting from being the next cool gadget to suddenly being a symbol of excess.
I have a feeling that not just iPhones, but other smartphones will end up looking like “symbol of excess”. If that happens, RIM will probably be affected the most. Unfortunately for RIM, its Blackberry Storm and Blackberry Bold launches are coming in the first quarter after the major financial crisis and as US heads into a recession. Whether RIM will see the same bounce in sales as Apple did, remains to be seen.
All carriers will see further worsening of their ARPU during Q4 2008, according to the IE Market Research Corp.’s 4Q 2008 United States Mobile Operator Forecast, 2008 – 2010 report. In Q208, the ARPU declined by 1.7% across all carriers. However, Sprint and T-Mobile will be more adversely affected as it takes them longer to get a return on their their investments in WiMax and 3G respectively.
Nokia today announced their Q3 2008 results and they were not pretty. The global financial crisis affected them just like all other companies. Nokia had already pre-announced that the numbers would be lower than their earlier estimates. Today, we saw how much lower. During Q3, Nokia’s market share declined to 38% from 39% in Q2 2008 and 40 % in Q3 2007. The results were flat over last quarter and showed a decline year over year. The revenues for the quarter were at €12.2 billion which is 7% below previous quarter and 5% below the Q3, 2007 revenue. Nokia earned €1.4 billion which is flat with Q2 2008 but 21% decline YoY. In EPS terms, this translates to €0.29 per share which is 28% decline YoY. Nokia completed the Navteq acquisition during this quarter and the revenue and earnings numbers from Navteq are reflected above.
In morning trading, Nokia was trading at $15.55 which 2.91% higher than yesterday
This week has been a rollercoaster ride for the financial industry and the economy as a whole. And in a sign that all parts of the economy are interlinked, especially, the financial industry and the mobile phone industry, Reuters is stating that:
Mobile phone makers and operators risk losing thousands of their most profitable customers as financial havoc whacks the global banking industry.
According to Reuters, Blackberry maker RIM might be hardest hit. This is logical given that financial industry will shed several thousand jobs as part of this shakeup and that large corporations make up nearly 40% percent of RIM’s customer base. RIM’s co-chief executive Jim Balsille was quoted as saying that the people will still hold on to their mobile even in turbulent times. He also said on Thursday in Mumbai at the launch of the BlackBerry Bold smartphone in India:
But there’s clearly got to be a point where there is an impact. Macroeconomic factors have gotten all the more turbulent in the last week, and maybe it will come to that tipping point,
Though, Jim did not comment on whether RIM stood by its guidance for the second quarter and rest of the year.
[Thanks, Mia, for sending this in]
Symbian yesterday released its 1st half 2008 and 2nd quarter 2008 performance. It had robust growth in 2008 with 10% increase in units shipped year over year from 34.6m to 38.1m units and 5% increase in Q2 from 18.7m to 19.6m units. It also increased the number of handset models in the 1st half of 2008 by 30% to 159 models. At the end of Q2, seven Symbian licensees had 92 phone models in development, an increase of 48% on Q2 2007 (62 models) – the highest ever achieved. All the growth in 2nd quarter resulted in Symbian keeping its leading status with 6.4% of 304m handsets sold in Q2 that Gartner reported.
So, lets see how it did against Apple. In Q2 2008, Apple shipped 717,000 iPhones compared to 270,000 in Q2 of 2007, a 166% increase. However, in terms of market share, this amounts to only 0.2% of the 304m handsets sold. Another important area of revenue for both companies is applications marketplace. While Apple has upward of 2500 applications in its App Store, Symbian without a similar marketplace, has nearly 10,000 applications.
As you can see Symbian is holding its own against the iPhone challenge and is in fact growing. With Nokia’s decision to buy out its other partners in Symbian and to open source the OS, I see a very healthy and strong future for Symbian, not to mention a formidible competitor.