Nokia Oyj, the Finnish mobile network company, announced
disappointing Q1 earnings due to a slowdown in demand for
its 5G gear in some of its more mature markets. Its adjusted
operating profit was €479 million ($525 million), which
missed the average analyst estimate of €544 million. The
company's shares fell as much as 4.2% in Helsinki, continuing
losses from the previous year to 15%. Nokia CEO Pekka
Lundmark said that the economic environment has started to
impact customer spending and that they will maintain cost
discipline to navigate the uncertainty successfully.
Sales in the lower-margin markets like India and a decline in
spending by US carriers are causing pressure on 5G equipment
vendors. Despite a slowdown in North America, Nokia's India
deployments during the quarter outstripped it. Lundmark
mentioned that the slower build-out pace and inventory
digestion were causing the weakness, leading to a similar
trend in Q2 as in Q1.
Ericsson AB, Nokia's competitor, also reported better-than-
estimated earnings but warned of a choppy 2023 that would
lead to margin pressure. Nokia expects that profitability in
H2 2023 will be stronger than H1. The company maintained its
guidance of an operating margin of 11.5% to 14% this year
compared to 12.5% in 2022, on a comparable basis. The sales
outlook is unchanged, with an increase to as much as €26.2
billion projected for this year.
Nokia agreed to divest part of its Radio Frequency Systems
business and VitalQIP business as part of its plan to actively
manage its portfolio and secure a leading position in all
segments where it decides to compete. The company also
recently agreed to sell its stake in the TD Tech joint venture.
The deals are proof of Nokia's active portfolio management,
said Lundmark.
In Q1, Nokia regained its investment-grade credit rating,
which it had forfeited over a decade ago. The company
immediately made use of the higher rating by raising €500
million from the sale of its debut sustainability-linked bond.
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