Nokia warns of ‘tough’ year as it catches up

HELSINKI (Reuters) – Finnish telecommunications network equipment maker Nokia has warned of challenges ahead this year as it tries to catch up with rivals after a good end to 2020.

While Nokia and rival Ericsson have won 5G customers that might otherwise have gone to Chinese Huawei, Ericsson has fared better, also winning big 5G contracts in China, where the deployment of the next-generation network is in full swing.

“We haven’t made a breakthrough in 5G (in China) yet, but of course we are not ruling out that possibility for the future,” new chief executive Pekka Lundmark told Reuters. “But we want to be careful so that we don’t want to be there at all costs.”

Lundmark on Thursday reported better-than-expected fourth quarter revenue and underlying profit, but Nokia predicts 2021 revenue to fall to between € 20.6 billion and € 21.8 billion ($ 25 billion to € 26 billion of dollars) against 21.9 billion euros in 2020.

“We expect 2021 to be difficult, a year of transition, with significant headwinds due to loss of market share and price erosion in North America,” Lundmark said.

Nokia said it lost part of the Verizon 5G contract in the United States to Samsung Electronics.

Lundmark announced a new strategy here in October, whereby the company will have four trading groups and said Nokia will “do whatever it takes” to take the lead in 5G as it plans to capture shares as well. from Huawei.

“We believe that since the start of the year, we have captured about half of the geopolitically influenced opportunities,” Lundmark said. “Most of these cases have occurred in Europe.”

Nokia said the growth in sales of 5G equipment in the quarter was partially offset by the decline in its legacy radio access products. Revenue from its core networking business fell 7% to 5.04 billion euros ($ 6.05 billion).

Overall revenue fell 5% to 6.57 billion euros in the quarter, but broke a consensus figure of 6.42 billion euros, according to data from Refinitiv Eikon.

Quarterly operating income fell to 0.14 euro per share from 0.15 euro a year ago, beating the consensus by 0.11 euro.

There was also an increase of around 250 million euros of one-time items and a turnover of 150 million in the quarter expected in 2021.

Nokia shares, which were down 1.9% in morning trading, have seen wild swings over the past two weeks with the stock being the target of the retail frenzy, alongside GameStop Corp and other tech companies.

“We maintain our view that Nokia continues to lag behind Ericsson in technology and is unlikely to catch up until 2022,” said Janardan Menon, analyst at Liberum.

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