Ericsson to Nokia: "So what's your secret?"

Ericsson and Nokia often find themselves grouped together. They compete head-to-head in several areas and are both global giants from Scandinavia. Calling them arch-rivals may be going too far but they certainly always keep an eye on each other.

So with both companies announcing first quarter results just hours apart, it's hardly surprising judging one by assessing the other is too much for most commentators to resist. And what different tales they have to tell. Nokia wasn't expecting an easy ride, but its total sales - including its leading mobile phone business and other areas such as its networks and corporate venturing arms - reached E8bn (£5bn), up 22 per cent from the corresponding period a year ago. Net profit also increased 15 per cent to E1.05bn (£650m). Now none of this must have made anyone backing Ericsson feel too good. Not its management, not its shareholders, and certainly not its employees. The Swedish company is laying off an additional 10,000 staff to cut costs, reported a five per cent decline in sales, and revealed heavy losses of E532m (£333m). And while Nokia bucked the trend of mobile phone manufacturers struggling in a crowded marketplace, Ericsson sold 52 per cent fewer units year-on-year. No wonder rumours of a tie-up with Sony's mobile division briefly sparked some optimism on Thursday. Official statements from both companies' CEOs read like glass half-empty, half-full comments. Nokia's Jorma Ollila spoke of getting on with "managing the day-to-day challenges of a demanding economic environment", while Ericsson's Kurt Hellstrom fell back on "a general economic downturn and an abruptly slower telecom sector" for his excuses. But for all the clear-cut differences between the two we shouldn't dismiss Ericsson too quickly. The current downturn makes long-term predictions difficult. We're entering an era of transition - many mobile sales will now be for replacement phones in developed markets, and worldwide sales have dropped off dramatically (for now) as network operators switch from TDMA to GSM/GPRS (mostly in North America) and from PDC to 3G (in Japan). There is still an opportunity for both these companies to benefit from the communications boom, as there is for others with problems such as Alcatel, Lucent and Motorola. It won't be easy, but the pot of gold at the end of the rainbow is what keeps them in the game.