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Nokia’s second-quarter net sales were down 11% from a year earlier. (AFP)
Nokia’s second-quarter net sales were down 11% from a year earlier. (AFP)

Nokia raises profit guidance with 5G comeback plan on track

  • Nokia said it expects to slightly underperform its primary addressable market, excluding China
  • Its fortunes are set to improve as a new low-cost radio-access base station puts it back in the game on 5G

Nokia Oyj bumped up its full-year earnings guidance after slashing costs and overhauling its products to catch up with rivals in the market for fifth-generation wireless networks.

  • The company expects diluted earnings per share of 0.25 euro cents, plus or minus 5 cents, versus a previous projection for 0.23 euro cents.
  • Adjusted operating profit for the second quarter was 423 million euros, beating average analyst estimates of 289.8 million euros according Bloomberg-tracked ratings.

Key Insights

  • Chief Executive Officer Rajeev Suri’s last results as CEO mark a low-point for Nokia after it lost ground to competitors in 5G mobile networks and the coronavirus disrupted supply chains and dampened investment.
  • Nokia-level revenue was down in the quarter" largely due to Covid-19 and China declines, Suri said in the statement. “We expect that the majority of sales missed in the quarter due to Covid-19 will shift to future periods."
  • Its fortunes are set to improve as a new low-cost radio-access base station puts it back in the game on 5G and chief rival Huawei is forced out of key European markets by a U.S.-led boycott campaign. That company’s struggles may be one reason Nokia can upgrade its guidance.
  • Nokia said it expects to slightly underperform its primary addressable market, excluding China. Previously it had said it expected to perform in line with the market.

Market Context

  • Nokia shares were up about 4% for the year through Thursday’s close. More analysts are advising clients buy the stock than are recommending a hold or a sell stance.
  • Suri’s replacement, Pekka Lundmark, takes over on Aug. 1 and is expected to begin a review of strategy. Suri’s biggest move was to buy rival Alcatel-Lucent in 2016, a deal that gave Nokia a wider product portfolio but required a complex integration process that, according to analysts, distracted management just as the 5G race was beginning.
  • Nokia’s second-quarter net sales were down 11% from a year earlier to 5.09 billion euros ($6.05 billion), compared to an average analyst forecast of 5.31 billion euros.
  • Nokia reported an operating margin of 9.5% plus or minus 1.5 percentage points, against a previous midpoint of 9.0%.
  • Nokia Cuts 1,200 French Jobs in Former Alcatel-Lucent Business

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