Nokia Networks business posted revenue of EUR 4.971 billion (–5 percent) in Q2 2017, primarily due to Ultra Broadband Networks.
Nokia Networks business generated EUR 1,026 million (–5%) from Asia-Pacific, EUR 1,091 million (–10%) from Europe, EUR 627 million (–7%) from Greater China, EUR 298 million (–16%) from Latin America, EUR 431 million (+5%) from the Middle East & Africa and EUR 1,498 million (–7%) from North America.
Nokia Networks business has generated EUR 2.165 billion (–8 percent) from Ultra Broadband Networks, EUR 1.448 billion (flat) from Global Services and EUR 1.358 billion (–4 percent) from IP Networks and Applications in Q2 2017.
Within Ultra Broadband Networks, Mobile Networks declined in Q2, while Fixed Networks declined at a lower rate in Q2 compared to Q1.
Within IP Networks and Applications, IP/Optical Networks declined at a lower rate in Q2 compared to Q1, and Applications & Analytics grew. Global Services net sales were approximately flat.
Nokia Networks business achieved gross margin of 39.1 percent and operating margin of 8.2 percent, with solid performance across Ultra Broadband Networks, Global Services and IP Networks and Applications.
“With the good work in the quarter, I remain confident that we will deliver on our full-year guidance of an operating margin of 8-10 percent in our Networks business,” Nokia CEO Rajeev Suri said.
Nokia expects its primary addressable market with communication service providers to be slightly more challenging in 2017 than earlier forecast.
“We now expect a decline in the market in the range of 3-5 percent, versus our earlier view of a low-single digit decline. In addition, we continue to expect our Networks sales to perform in line with the market,” Rajeev Suri said.
Nokia is seeing catalysts in telecom markets such as the United States, China and Japan that point to an acceleration of 5G and the commencement of meaningful roll-outs in 2019.
Nokia presents weak outlook
Nokia said the outlook for net sales and operating margin for Nokia’s Networks business in full year 2017 are expected to be influenced by factors including 3 to 5 percent decline in the primary addressable market for Nokia’s Networks business and uncertainty related to the timing of completions and acceptances of certain projects, particularly in the second half of 2017.
Ultra Broadband Networks
Ultra Broadband Networks sales fell 8 percent due to both Mobile Networks and Fixed Networks. The drop in Mobile Networks sales was primarily due to radio networks and converged core networks.
Small cells delivered strong growth in percentage terms. Radio networks business dipped primarily related to Greater China, North America and Europe, partially offset by growth in Asia-Pacific and Middle East & Africa.
Converged core networks fell primarily related to North America.
The decrease in Fixed Networks net sales was primarily due to broadband access and, to a lesser extent, services and digital home. The decrease was primarily related to one specific customer which completed a large project in Asia-Pacific in the fourth quarter 2016.
Broadband access fell due to Asia-Pacific and, to a lesser extent, North America, partially offset by Europe. Decrease in digital home was primarily related to Latin America.
The approximately flat sale in Global Services was due to growth in network implementation, partially offset by decreases in systems integration and care.
Network implementation fell primarily related to North America, Greater China and Asia-Pacific, and primarily related to the timing of certain projects. This was partially offset by a decrease in Middle East & Africa.
Systems integration business dropped primarily related to Europe, primarily attributable to the winding down of a specific set of legacy Alcatel-Lucent contracts. For care, the decrease was primarily related to Asia-Pacific.
IP Networks and Applications
IP Networks and Applications sales decreased 4 percent due to IP/Optical Networks, partially offset by Applications & Analytics.
The decrease in IP/Optical Networks sales was due to both IP routing and optical networks, primarily due to weakness in the communication service provider market, as well as a product portfolio transition in IP routing.
IP routing business dipped primarily related to North America and Europe.
Optical networks dropped primarily related to Latin America, Europe and North America, partially offset by growth in Asia-Pacific.
The increase in Applications & Analytics net sales was primarily due to growth in the services, network management, operational support systems and emerging businesses business units, the latter two of which showed particularly strong growth in percentage terms.