Ericsson not ditching the ‘low end’
Ericsson plans to hold on to its services businesses, refuting recent predictions by rival Nokia Siemens Networks (NSN) that infrastructure vendors will be forced to shed their “low-end” deals.
Nokia Siemens executives told reporters this week that the “be-all” model of its larger competitors “can’t survive.” The money-losing company sold off a number of its units last year as part of a turnaround effort that has narrowed its focus to infrastructure, particularly LTE.
NSN marketing executive Barry French forecast that other infrastructure vendors like Ericsson would soon follow suit and shed their less-profitable businesses.
But Vish Nandlall, who oversees Ericsson's operations in North America, says that's not a strategy the company plans to pursue anytime soon.
"It's one more thing that gives us the critical advantage," he said in an interview. "There are very few vendors that can provide the support that we do to the vendors."
Ericsson's services business comprised about 40 percent of its first-quarter sales at nearly $3 billion, an 18 percent increase over last year. Its managed services deals in the United States include large contracts with Sprint and Clearwire.
"We think that as we move from just being a network and equipment OEM to an actual partner to the operators, they're benefitting from the scale and presence in North America that Ericsson provides, and it gives us an opportunity to them as they build their network," Nandlall said.
Ericsson already has considerable market share in the United States, having landed LTE infrastructure deals with all of the top four operators after announcing a new contract with T-Mobile USA this week.
Nandlall declined to comment on financial specifics of the $4 billion project, but he said "you could probably draw a direct line to our existing market share" of about 50 percent.
Ericsson has a solid grip on the LTE market, particularly in North America, a strategy that helped it weather a major downturn in its CDMA business last quarter. Operators are slashing investment in legacy 3G technologies to focus spending on next-generation networks.
Ericsson has found a niche where others have struggled to survive amid steep price competition from Chinese vendors Huawei and ZTE. Its profits more than doubled during the first quarter, even as Alcatel-Lucent, its primary competitor, warned of weaknesses in its business despite managing to swing into the black. NSN’s losses swelled to $1.3 billion, and sales fell 7 percent during the same period.
Nokia Siemens sold its microwave backhaul business, fixed-line unit and WiMAX operations late last year and then cut 23 percent of its remaining workforce. By contrast, Ericsson last year acquired Telcordia and announced in February it was buying Wi-Fi specialist BelAir Networks.