Nokia Raises Long-Term Profitability Target on Strong 4G Demand

Finnish telecoms equipment maker Nokia on Friday lifted its long-term profitability target after meeting strong demand for faster 4G networks this year, and said it also expected the business to grow in 2015.

The company, which ranks third in the global network-equipment market after Ericsson and Huawei Technologies, said it now targets long-term networks operating margin in the range of 8 and 11 percent, compared to its previous target of 5 to 10 percent.

Analysts had widely expected an increase as Nokia last month reported a margin of 11.4 percent from the first nine months of the year on the back of large network roll-outs in North America and China as well as earlier cost savings.

Nokia, which on Friday is holding its first capital markets day in five years, is expected to shed light on how it can sustain profitability as the build-out of faster 4G networks has begun to peak in many parts of the world.

The presentations come a day after market leader Ericsson announced plans to cut costs to help it cope with weaker growth prospects in the market.

Shares in Nokia slipped 1.3 percent to 6.50 euros by 0835 GMT ahead of the event in London.

Nokia sold its struggling handset business in April to Microsoft in a 5.6 billion euros ($7 billion) (roughly Rs. 43,100 crores) deal that transformed it into an almost pure play network equipment maker.

On Friday it also gave outlook for 2015, saying it expects its networks sales to grow year-on-year with its operating margin in line with the new long-term target.

"Expectations for 2015 (margin) have been on the upper end of that range, so perhaps that guidance was a slight disappointment for the market," said Inderes analyst Mikael Rautanen.

"But it is good to remember that Nokia has been very conservative with its outlook lately," he added,

Nokia said it expects its small navigation unit "HERE" to grow next year and show an operating margin of 5-10 percent.

Nokia also has a patent portfolio dating back to the time as the world's largest phone maker. The company said it expects sales at the patent unit Technologies to grow in 2015, but added the forecast excluded potential gains from arbitration with Samsung.

© Thomson Reuters 2014