(July 18): Nokia Oyj sales in the second quarter were the lowest of any period since 2015 and missed analyst estimates, as weak investment in mobile network upgrades continues to hobble the 5G equipment market.
Net sales declined 18% to €4.47 billion (RM22.81 billion) in the quarter from a year earlier, the Espoo, Finland-based company said in a statement on Thursday. The revenue figure excludes its undersea cable business, which it is selling. It compares to an average €4.76 billion forecast by analysts surveyed by Bloomberg.
Nokia shares fell 9% to €3.26 at 10.28am in Helsinki. The stock has risen 6.7% so far this year.
Nokia and its Nordic competitor Ericsson AB have faced a dismal telecom equipment market for years with few signs that mobile operators are going to invest big in 5G equipment anytime soon. Both companies have slashed thousands of jobs in the last year and streamlined operations to save costs.
The weak telecom equipment market has pushed Nokia to make major changes to its network infrastructure division, such as a US$2.3 billion (RM10.73 billion) bet on artificial intelligence-driven demand for data centre services with the purchase of Infinera last month. It also plans to sell Alcatel Submarine Networks, its undersea cable business, to the French government.
“The order backlog is growing and that’s obviously a factor that we are seeing” contributing to an improving dynamic, Nokia chief executive officer Pekka Lundmark said in an interview. “No question volumes are extremely weak at the moment when you look at the top line.”
Revenue in the period was the lowest since the fourth quarter of 2015, before Nokia acquired Alcatel-Lucent for €10.6 billion, according to data compiled by Bloomberg.
Adjusted operating profit was €423 million in the quarter, beating an average analyst estimate of €372 million. Nokia reconfirmed its 2024 profit forecast.
“We have taken so much action on cost and as you can see when you look at the profitability side of it that, despite the top line weakness, we have actually been able to defend the profitability pretty well,” Lundmark said.
Both net sales and operating profit in the period were boosted by €150 million after settling an outstanding contract with US operator AT&T Inc, Nokia said.
“Nokia reported a better-than-expected comparable operating result, but it was achieved with a large one-time item for Mobile Networks as a result of the termination of the AT&T contract,” Inderes analyst Atte Riikola said in a note. “Excluding this, the operational development of networks businesses was softer than expected.”
The North American market is showing early signs of recovery, Lundmark said on a call with reporters, echoing remarks by Ericsson CEO Börje Ekholm last week. Ericsson beat out Nokia for an US$14 billion network deal with AT&T late last year.
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