Nokia and Ericsson: A Tale of Two Telcos

"Nokia and Ericsson: A Tale of Telcos", found at BusinessWeek.com, discusses how Nokia and Ericsson are heading in two different directions after financial results fell short of what analysts expected. Both company's reports were nothing great, however Nokia is in a much worse position than Ericsson. The reasons behind Nokia's decreased earnings and plunging shares, many feel, are the falling average selling prices for phones, flat market share, and a slightly lowered forecast for operating margins this year. Although the biggest cause behind the negative results is the Apple iPhone. While Apple received about $622 dollars in product and service revenues, Nokia's devices sold for an average of $207. In other words, Apple made 22% more revenue on 60% fewer units. Not only has Apple stolen the market buzz, but they have sent Nokia reeling. Ericsson's financial results may have been even worse than Nokia's, yet their shares soared mainly due to North American sales almost doubling. Helping boost Ericsson's North American sales was the well-timed deal they struck with AT&T. Ericsson is also tied to the iPhone, only they feel it has benefitted their compnay rather than hurt it. According to Ericsson CEO, Hans Vestvurg, "Investors see huge opportunities for Ericsson to sell equipment that serves that growing demand, which in some cities has already lead to network saturation". While Ericcson soars to new heights, Nokia's shares will remain under pressure until they come up with an answer to the iPhone.