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Nokia reports “weak Q1”

April 25, 2019

Nokia has reported significant losses in the first quarter. The company blamed “competitive intensity” in some of its accounts which it said was due to its rivals becoming more “commercially aggressive” in 5G. Overall it said 5G revenue would grow “sharply” over the course of the year despite the stumbling start.

Revenue in the first quarter grew 2 per cent to €5 billion. The Finland-based company would have been boosted by €200 million of 5G sales that it was unable to take into account due to revenue recognition policies. It expects to recognise these by the end of the year.

An operating loss of €59 million was a huge drop from the €239 million profit on the same period a year ago.

The company’s networks business generated a loss of 254 million euros ($283.26 million) during the quarter, compared with a gain of 46 million in the year-ago quarter, as its own investments into 5G are yet to generate profits.

“Q1 was a weak quarter for Nokia. We expected that it would be, and the outcome has not changed our perspective on the full year. We are confident that those issues that drove weakness in our results will ease over the remainder of the year. While overall risks have increased slightly, we continue to see positive developments and are maintaining our guidance for the full year.”

“As the year progresses, we expect meaningful topline and margin improvements. 5G revenues are expected to grow sharply, particularly in the second half of the year, driven by our 36 commercial wins to date. Global services profitability should improve as we recover in a handful of large rollout projects, IP routing is now firmly back to growth given our product leadership, and optical networks continues its long run of growth. We are also seeing good underlying momentum in our strategic focus areas of software and enterprise, and we are moving steadily forward on our path to build a strong licensing business that is sustainable for the long-term.”

“In terms of risks, one factor is our slow start to the year. In addition, 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. We will continue to take a balanced view, and are prepared to invest prudently in cases where there is the right longer-term profitability profile. We are also progressing well with our previously announced €700 million cost savings programme. In short, an expectedly weak Q1, but continued reason for optimism as the year progresses,” he concluded.

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