Nokia networks indicates better future after 4% revenue drop in Q4

nokia-event-in-2016
Nokia networks business reported revenue of EUR 5.827 billion (–4 percent) in Q4 2017 mainly due to variations in foreign exchange rates.

The annual revenue of Nokia networks business dipped 6 percent to EUR 20.523 billion mainly impacted by poor demand for telecom networks from telecom operators in most of the global markets.

Competition in China from Huawei and ZTE, two China-based technology companies, was one of the reasons for Nokia’s poor show.

Ericsson, the main rival of Nokia, has reported 12 percent drop in its Q4 revenue, and announced major restructuring program to revive the telecom network business.

The Finland-based telecom equipment maker recorded poor performance in all its business units in Q4.

Nokia generated EUR 2.471 billion (–4 percent) from Ultra Broadband Networks, EUR 1.642 billion (–7 percent) from Global Services and EUR 1.714 billion (–1 percent) from IP Networks and Applications in the fourth quarter of 2017.

Nokia posted operating profit of EUR 647 million (–25 percent) from network business, EUR 267 million (–20 percent) from Ultra Broadband Networks, EUR 121 million (–47 percent) from Global Services and EUR 259 million (–12 percent) from IP Networks and Applications.

Nokia CEO Rajeev Suri said: “Group profitability increased in both the quarter and the full year, and gross margin remained resilient in Networks despite the dilutive impact of robust competition in China.”

Nokia’s Future Growth

# 5G network deployments
# Growth in adjacent markets
# Software business

Nokia CEO said networks market will decline again in 2018, though at a slightly lower rate than our previous forecast, given early signs of improved conditions in North America. “We expect market conditions to improve markedly 2019 and 2020, driven by full-scale rollouts of 5G networks,” Rajeev Suri said.

Nokia said its operating margin will be under some pressure in 2018 due to the acceleration of investment in 5G.

Nokia’s Networks sales is anticipated to grow faster than its primary addressable market over the longer-term and operating margin to expand between 2018 and 2020 primarily due to

improved scale, as commercial 5G network deployments are expected to begin in 2019 and increase in 2020.

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