Sunday, 26 May 2019

Opinions differ on element of surprise in Nokia's Q1 loss

By Mary Lennighan, for Total Telecom
Thursday 25 April 19

Finnish vendor reports quarterly loss of €59 million, sees near-term pressure from Huawei 5G security issue

Industry-watchers were surprised by the Q1 net loss posted by Nokia on Thursday, but the vendor itself did its best to convince the market that everything's under control. Nokia chef executive Rajeev Suri admitted that the first quarter was weak for Nokia, but "we expected that it would be…

Industry-watchers were surprised by the Q1 net loss posted by Nokia on Thursday, but the vendor itself did its best to convince the market that everything's under control.

Nokia chef executive Rajeev Suri admitted that the first quarter was weak for Nokia, but "we expected that it would be, and the outcome has not changed our perspective on the full year," he insisted.

"We are confident that those issues that drove weakness in our results will ease over the remainder of the year," Suri said. "While overall risks have increased slightly, we continue to see positive developments and are maintaining our guidance for the full year."

However, the most-used word amongst the financial newswires was "unexpected," in relation to Nokia's bottom line performance, at least.

The vendor turned in a non-IFRS operating net loss of €59 million, compared with a profit of €239 million in Q1 last year. Its reported net sales increased by 2% to €5.03 billion, buoyed by currency fluctuations; at constant currency levels sales dropped by 1%.

Nokia noted that it was unable to book around €200 million of net sales related to 5G deliveries, mainly in North America, but said it expects to do so before the end of the year. Nonetheless, the results cast doubt over Nokia's position in the 5G space.

"Competitive intensity has slightly increased in certain accounts as some competitors seek to be more commercially aggressive in the early stages of 5G and as some customers reassess their vendors in light of security concerns, creating near-term pressure but longer-term opportunity," Suri said, clearly choosing his words carefully.

Operators could well be delaying 5G investment decisions as a result of the uncertainty surrounding Huawei's participation in a number of key markets – a government leak earlier this week indicates it will be able to supply 5G network kit in the UK, incidentally – but there are also questions over Nokia's own readiness for 5G. Arch-rival Ericsson turned in a stronger first-quarter performance earlier this month.

Nokia is nothing if not determined to ignore all doubters though.

"We expect substantially stronger financial performance in the second half of 2019 as large scale 5G deployments accelerate meaningfully," it said.

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