Nokia Results Beat Provides Some Relief to Tested Investors
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Nokia Oyj shares gained after the company reported fourth-quarter profit that exceeded expectations, bringing relief to investors concerned about the Finnish company’s checkered performance in the early stages of 5G rollouts.
The Finnish network-equipment vendor posted adjusted earnings per share of 0.15 euros in the fourth quarter, higher than the 0.13 euros analysts surveyed by Bloomberg had expected on average.
Key Insights
The improvement in earnings reflects progress on the company’s cost savings program, though lower gross profit, particularly within the mobile access part of the company’s network division, was a drag on the results.Though operating profit of 1.13 billion euros ($1.2 billion) exceeds the Bloomberg consensus estimate of 1.09 billion euros, the company remains under pressure after it slashed its outlook in October and faces the challenge of reducing costs for making equipment to upgrade networks to 5G from 4G.Nokia warned that, excluding China, its addressable market is likely to be stagnant this year compared with 2019, and that pursuing market share in China would challenge profitability -- meanwhile, rival Ericsson AB has been aggressive in trying to expand there.“We have faced challenges in Mobile Access and in cash generation,” Chief Executive Officer Rajeev Suri said in a statement. “While I believe that 2020 will present its share of challenges, I am confident that we are taking the right steps to deliver progressive improvement over the course of this year and to position us for a stronger 2021.”
Market Reaction
Nokia shares gained 4.1% as of 10:19 a.m. in Helsinki. Though the shares are up about 14% so far this year, they still haven’t made up for their 23% drop after the company’s third-quarter report in October.
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Nokia employees say management has been distracted by internal politics as it struggles to integrate Alcatel-Lucent following its takeover in 2016.The departure of Chairman Risto Siilasmaa and Chief Operating Officer Joerg Erlemeier were both announced in the wake of the October profit warning, stirring speculation about deeper changes at the company.See the numbers hereGet the statement
(Updates with context in first bullet under Market Reaction)
To contact the reporter on this story: Niclas Rolander in Stockholm at nrolander@bloomberg.net
To contact the editors responsible for this story: Thomas Pfeiffer at tpfeiffer3@bloomberg.net, Jennifer Ryan
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