Nokia Gets on 5G Growth Path as New Sales Strategy Takes Shape

Finnish telecom network equipment maker Nokia on Thursday showed how its new strategy was driving growth in sales of network and 5G equipment, helping to boost first-quarter revenue and profit and sending its shares up 14 percent.

Nokia and Swedish rival Ericsson have been gaining more customers as telecom operators start rolling out 5G networks and China's Huawei faces curbs from a growing number of governments over security concerns.

"This year we are seeing great demand in 5G and also in what we call network infrastructure which is basically fiber connections to homes and offices," Chief Executive Pekka Lundmark said in an interview.

After taking the top job last year, Lundmark has streamlined Nokia's operation, cut jobs, and made changes to recover from product missteps under the company's previous management that hurt its 5G ambitions and weighed on its shares.

"We expect our typical quarterly earnings seasonality to be less pronounced in 2021," Lundmark said.

The demand for infrastructure, driven by the pandemic, is now spread out through the year, easing seasonality, which earlier resulted in outsized growth in the fourth quarter.

Quarterly revenue rose 3 percent to EUR 5.08 billion (roughly Rs. 45,600 crores), beating a consensus figure of EUR 4.72 billion (roughly Rs. 42,370 crores), , according to IBES data from Refinitiv.

"These are a solid set of results and a good start to the year for Nokia," said Richard Webb, an analyst at CCS Insight. "In particular the operating margin of 11 percent looks healthy and shows that the restructuring is having some positive impact."

Sales at Nokia's network infrastructure business, which includes optical and fixed network products, rose 28 percent to EUR 1.73 billion (roughly Rs. 15,530 crores), helped by demand from enterprise customers.

Quarterly profit rose to EUR 5 cents (roughly Rs. 5) per share while adjusted profit was EUR 7 cents (roughly Rs. 6) per share. Analysts had expected EUR 1 cents (roughly Re. 1).

Its comparable gross margin rose to 38.2 percent from 36.4 percent a year earlier, mainly driven by 5G growth.

Nokia maintained its full-year net sales forecast of between EUR 20.6 billion (roughly Rs. 1,84,940 crores) to EUR 21.8 billion (roughly Rs. 1,95,710 crores), largely in line with expectations.

Ericsson last week reported quarterly core earnings above market estimates, helped by higher margins and 5G rollout.

© Thomson Reuters 2021