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Nokia cuts full year profit

by on29 October 2020

Change of cunning plans

Telecom equipment maker Nokia cut its full-year profit and margin forecasts as the Finnish company's new chief executive overhauled its strategy to win the 5G race.

Under Pekka Lundmark’s cunning plan the company will have four business groups, CEO said Nokia would "do whatever it takes" to take the lead in 5G where it lags Swedish rival Ericsson and Chinese group Huawei.

Nokia lowered its full-year profit outlook range by 0.02 euro to a midpoint of 0.23 euro per share, having reported third quarter results broadly in line with analysts’ expectations.

“We expect to stabilise our financial performance in 2021 and deliver progressive improvement towards our long-term goal after that”, Lundmark said in a statement.

The company also cut its 2020 operating margin forecast to nine to 9.5 percent and for 2021 expects operating margin of 7-10 percent.

JP Morgan analysts said higher research and development spending was likely to drive the margins lower than the consensus expectations of 10.9 percent for 2021.

Ericsson last week reported quarterly core earnings above market estimates, helped by higher margins and China’s 5G rollout, and said it was “more confident” in meeting its 2020 targets.

Unlike Ericsson, Nokia has not won any 5G radio contracts in the highly competitive Chinese market.

Nokia and Ericsson have been gaining more customers in Europe as more telecom operators start rolling out 5G networks and China’s Huawei is increasingly shunned by several governments over security concerns.

Nokia, however, suffered a setback in the third quarter when it lost out to Samsung Electronics on a part of a contract to supply 5G equipment to Verizon.

“We have lost share at one large North American customer, seen some margin pressure in that market, and believe we need to further increase R&D investments to ensure leadership in 5G”, Lundmark said.


Last modified on 29 October 2020
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