Nokia, which today revealed an update on its strategy and operating model, said it aims to regain 5G leadership.
Nokia on October 29announced the first phase of its new strategy, outlining strategic principles and a new operating model designed to better position the company for changing markets and align with customer needs.
The new model is effective from January 1, 2021. Detailed business group strategies will be provided on Capital Markets Day on March 18, 2021.
Nokia’s ambition is to lead in all domains including innovation, products, standardization and patents, it said.
Pekka Lundmark took over the CEO job in Nokia in August after product missteps by the telecom network company saw it lag Swedish rival Ericsson and Chinese group Huawei in the race to win deals to sell 5G network equipment to mobile operators.
Several senior executives have left Finland-based company as it is moving to a new operating model to be implemented on January.
Pekka Lundmark said Nokia will now have 11 members in the new leadership team from 17 earlier and there were still two unannounced names who will leave the company.
Focus areas and margins
“We have a strong position in technologies that are important for critical networks, such as open and virtualized radio access networks and we are on course for a 100% cloud-native software portfolio,” says Pekka Lundmark.
Nokia sees a market evolution where value in critical networks will gradually shift from monolithic systems towards silicon, software and services; where the importance of cloud-native and open solutions will increase; and where value will be captured through different business models.
Nokia said it is one of the leading network equipment providers to evolve monolithic core networks to virtualized core networks that are fully cloud-native.
One of the focus areas will be to continue building out its capabilities in this area to ensure technology and market leadership
“Committing to long-term investment in research and innovation will allow us to anticipate and capitalize on industry changes and position us at the front of the pack when new technology windows open.”
Nokia provided its assumptions for its four new business groups and Group Common and Other in 2021 and over the longer term. The company will discuss the addressable markets, competitive positions and strategic focus areas for each business group during its strategy webcast to analysts.
Nokia’s previously provided outlook for 2020 and 2021 remains unchanged. In connection with its Q3 2020 results, Nokia expects comparable operating margin of 7-10 percent in 2021.
Nokia intends to provide recast comparative segment results for 2020 by mid-March 2021 and more detailed information at its Capital Markets Day on March 18, 2021.
Mobile Networks’ focus will be on executing its turnaround and regaining 5G leadership. It will focus on leadership in ORAN and vRAN, maintaining scale with CSP customers and growing its enterprise-dedicated Private Wireless Networks business.
It is expected to deliver comparable operating margin of around zero percent in 2021, and significant improvement over the longer term.
Network Infrastructure (previously IP and Fixed Networks) will focus on the building blocks and essential solutions of critical networks, using its technology leadership in IP Networks, Optical Networks, Fixed Networks, and Alcatel Submarine Networks to drive digitalization across all industries.
It is expected to deliver comparable operating margin in the high single digit range in 2021, and gradual improvement over the longer term.
Nokia said its Cloud and Network Services creates value for both service providers and enterprise customers as demand for critical networks accelerates, leading the transition to cloud-native software and as-a-service delivery models.
It is expected to deliver comparable operating margin in the mid-single digit range in 2021, and significant improvement over the longer term.
Nokia Technologies will continue to monetize and grow the value of Nokia’s intellectual property and licensing revenue by investing in innovation and its world-leading patent portfolio as well as pursuing other licensing opportunities.
It is expected to deliver a slight improvement in comparable operating profit in 2021, relative to 2020, and stable performance over the longer term.
