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Nokia’s Network Profits Show Year-on-Year Fall, Puts Alcatel-Lucent Deal in Question

April 30, 2015 - Written By Tom Dawson

 

Not too long ago, Nokia sold their handset business to Microsoft, essentially cutting off the limb that produced the Lumia devices. This left Nokia a smaller company, and obviously raised questions about how they would continue to bring money in for the future. The answer for Nokia was in their network solutions. As a major player in the history of wireless communication, it’s understandable that the company would double-down on their network solutions. After quite some time of building relationships and becoming a big player in the network field once again, Nokia and Alcatel-Lucent recently agreed to a deal that would see Nokia purchase the company. Thus creating an even larger, more powerful networks company. However, if recent figures are anything to go by, the deal could be under question, as Nokia posts a loss in network profits.

As Reuters is reporting, while the company’s first quarter revenue for networks exceeded expectations, year-on-year profits fell by 61% as a result of different products being sold, such as low-margin equipment in emerging markets like China. Since announcing the deal to purchase Alcatel-Lucent, Nokia shares have dropped by as much as 20%, which has led some to question the €15.6 ($16.6 billion) value given for Alcatel-Lucent. Analysts have been saying that it would be good for both parties if Alcatel-Lucent were to also post poor performance figures for the first quarter of the year.

The Alcatel-Lucent deal was posed to give the European duo better ability to compete against Ericsson and Huawei, but this sharp decline in profits year-on-year doesn’t bode well for Nokia Networks. After all, the network market had been a lucrative one for Nokia, so these figures have taken the industry and analysts by surprise. The HERE mapping firm which Nokia has apparently put up for sale could be a big help for Nokia’s bottom lime after such dismal figures. Hopefully, we won’t see much decline from Nokia’s network business in Q2 figures.