Nokia Posts Profit Growth on Back of LG Patent Deal, Networks Fall

Nokia reported larger than expected quarterly profits on Thursday, helped by a patent licensing deal, but warned that its mainstay network equipment market looked more challenging and that it was set to decline also in 2018.

Third-quarter group earnings before interest and taxes (EBIT) rose 20 percent from a year ago to EUR 668 million ($790 million), clearly above analysts' average forecast of EUR 541 million in a Reuters poll.

The profit was boosted by a one-off payment of EUR 180 million from a settled patent arbitration with LG. Operating profit from the networks business fell 23 percent year-on-year.

Nokia said it expected networks market conditions for this year to be slightly more challenging than earlier anticipated. It estimated a 4 to 5 percent market decline for 2017 and a 2 to 5 percent year-on-year fall for 2018.

Rajeev Suri, President and CEO of Nokia, spoke about the earnings in a statement, "The performance of our patent licensing business was the clear highlight of the quarter. We reached a favorable arbitration outcome with LG and have since reached agreement with them on a license for a longer term than what was set out in the arbitration. With this fast and effective execution against our patent licensing strategy, we have approximately doubled our recurring licensing revenue from EUR 578 million in 2014. I am also particularly pleased that in 2017 the growth in patent licensing has helped to offset the sales decline on the Networks side. We have excellent momentum and considerable opportunity to further develop the business in 2018 and beyond."

© Thomson Reuters 2017