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Nokia warns of trouble ahead

by on27 July 2017

Let's Face The Music And Dance

Finnish network equipment maker Nokia did better in its quarterly profits than many expected, thanks mostly to a deal it signed with the fruity tax-dodging cargo-cult Apple.

Nokia also saw improving profitability at its network business, but thinks there could be problems in its key market.

Second-quarter group earnings before interest and taxes (EBIT) rose 73 percent from a year ago to 574 million euro, clearly above analysts' average forecast of 447 million euro in a Reuters poll.

However, Nokia said the global network market would be more challenging in the full year than earlier forecast, citing uncertainty related to some projects.

Chief Executive Rajeev Suri said: “"We now expect a decline in the market in the range of 3-5 percent, versus our earlier view of a low-single digit decline. Nokia's network business, which accounts for roughly 90 percent of its sales, is expected to decline in line with the market trends," he said.

Nokia's profit growth is in stark contrast to loss-making Swedish rival Ericsson, which stunned investors this year by announcing $1.7 billion in provisions, writedowns and restructuring costs.

Demand for the current generation of faster 4G mobile broadband equipment has peaked, so equipment vendors are now waiting for telecoms firms to upgrade to next-generation 5G equipment, which Suri said would become "meaningful" in 2019.

Nokia bought Alcatel-Lucent in a $15.6 billion deal which gave it a larger fixed-line network business and made it less dependent on mobile broadband. The deal also helped it launch new router products aimed at internet giants.

Another major rival, China's Huawei, which is also a major phone manufacturer, reported a 15 percent rise in its half-year sales on Thursday, but it did not break down profits for its networks business.

Last modified on 27 July 2017
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