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4G Weekly Digest November 18th, 2009 - Volume 5, Issue 13

Editor's Foreword
By Adlane Fellah, CEO and Founder

In the last few weeks, numerous financial results from Tier 1 vendors caught the headlines of industry newsletters and portals.

Alcatel-Lucent's stock fell 5.8% as the network equipment vendor racked up wider third-quarter losses and saw revenues slide 9.3% year-on-year. The company reported a net loss of EUR182 million, compared to a loss of EUR40 million a year earlier. It posted an operating loss of EUR11 million on revenues of EUR3.69 billion, compared with analyst expectations of EUR14.4 million and EUR3.9 billion, respectively. “Our company continues its transformation journey,” noted Verwaayen in a statement, adding that the group has already realized 80% of the EUR750 million in cost cuts it was aiming for this year. Of significance, Alcatel-Lucent announced it has secured 16 LTE trials, including such high-profile operator names as France Telecom (Orange), Telefonica and Etisalat. The Orange trial is worthy of note as it is focused on both FDD and TDD modes. Alcatel-Lucent does not expect to turn a net profit until the second half of 2010. Alcatel-Lucent is not alone in its struggles; market-leader Ericsson shocked the market by reporting a huge 71% drop in net income (to SEK810 million/US$118 million). Sales for the Swedish vendor came in at SEK46.4 billion, a 6% slip on revenue of SEK49.2 billion in the year-ago quarter. A week earlier Nokia announced a EUR908 million write down at its struggling network equipment joint venture, Nokia Siemens Networks.

Moto preps recovery, Samsung posts record profit

Motorola's unexpected return to profitability in the third quarter may hide continuing troubles at its mobile devices division, but the company is confident the unit is on the road to recovery now that it has begun to unveil its new line up of Android-based smartphones. Overall, the US group reported Q3 earnings of US$12 million despite a 27% fall in total revenue to US$5.45 billion.

However, it shipped only 13.6 million devices in the three months ending in September, down 46% from the year before, taking its global handset market share to a low of 4.7%. The operating loss in Motorola's handset business was trimmed to US$183 million, from US$840 million a year before, as it cut costs and scrapped some of its most unprofitable handsets. The launch of the company’s two new Android-powered handsets - Cliq and Droid - as “important milestones” as Motorola attempts to begin to address the mobilization of the Internet and the growing demand for modern smartphones. I am impressed with Motorola's new DROID smartphones and MOTOBLUR software approach (based on Google's social networking and communications framework capabilities that are a part of Android 2.0) and think that they will ride it back to corporate profitability or make the sale of the device unit more attractive.

However, I am unsure what MOTO is doing with the sale of the desktop unit: Cisco, Microsoft and other networking/IT giants have recently spent billions acquiring companies (Scientific Atlanta) and developing products (Cisco and Huawei are working on LTE and WiMAX versions of home cable and DSL set-top boxes). While MOTO may view the set-top box market as a highly price sensitive commodity market, Cisco and others envision it becoming a gateway to home entertainment and, through service extensions, a portal to cloud computing/ICT networked environments. Similar to the cutthroat Wi-Fi marketplace, Cisco and other leaders have entered the commodity markets as a stepping-stone to more lucrative markets.

The speculation that Motorola is seeking the sale of their set-top box business may be coming amid concerns by Wall Street financial analysts that the company can succeed in LTE. Motorola has not won major contracts for LTE, while both new entrants Huawei and ZTE are positioned to gain share and have won recent contracts, including Huawei's breakthrough win against AL-LU and Ericsson in the European Union. Huawei was chosen by TeliaSonera, the largest telecoms operator in Scandinavia and the Baltic countries, to supply the world' s first commercial 4G/LTE network in Oslo, Norway. Under the agreement, Huawei provides an end-to-end LTE solution including base stations, core network and OSS (Operating Support System). Huawei also provides services including network design, implementation, systems integration and support.

Meanwhile, Samsung - the world's second-largest handset vendor - said third-quarter profit for the whole South Korean group tripled to a quarterly record as the global economic recovery spurred a rebound in prices. Q3 net income jumped to KRW3.72 trillion (US$3.1 billion) from KRW1.22 trillion a year earlier. Sales rose 29% to KRW24.86 trillion. It said it sold 60.2 million handsets in the third quarter, up 16% from the year-ago quarter.

Most Tier 1 vendors have suffered from the crisis, and mergers and acquisition activity will only continue to accelerate. Will Chinese vendors join the acquisition feast?

Enjoy!

Adlane Fellah
Maravedis CEO & Founder