Nokia Shares Decline Sharply On Profit Warning

Amid slowing demand for telecommunication equipment from wireless carriers and fixed-line operators from around the world, Finnish telecom giant, Nokia, earlier this month had reported a net operating loss for the third successive quarter this year. Various charges and additional expenses related to the company’s recent acquisition of French telecom equipment major, Alcatel-Lucent, had also reportedly added to the losses for the company. Nokia’s share price has been on a steady decline ever since analysts declared earlier this year that they were bearish on the stock going forward. However, earlier today, the company’s share took a massive nosedive, falling as much as 8% in early trade at the Helsinki Stock Exchange in Helsinki, Finland.

According to Nokia’s quarterly earnings report released earlier this month, the company’s third-quarter network sales fell 12% YoY to €5.32 Billion, which is only marginally lower than the average market expectation of around €5.39 Billion ($5.89 Billion). More disconcertingly, the company reported a net loss of €125 Million ($136 Million) for the quarter, even though it still reported an operating profit of €432 Million ($472 Million). During the same period last year, Nokia had reported a net profit of €152 million, which is just over $165 million in today’s exchange rate. As part of its revenue guidance, Nokia’s CEO, Mr. Rajiv Suri said that he expects network sales to decline even further going forward, thanks to a slowdown in demand for 4G equipment worldwide. The company also said that it does not expect demand for 5G equipment to pick up until 2020, making matters even worse for the sector.

In a statement released to the media at its quarterly earnings call earlier this month, Nokia insisted that as a way to mitigate risks and offset a decline in the wireless infrastructure market, it would continue to broaden its product portfolio by actively expanding its fixed-line network business that it inherited from its Alcatel-Lucent acquisition. However, the company is yet to see any positive effect of its high-profile €15.6 billion ($17 billion) acquisition that it completed earlier this year after getting the necessary clearances from government regulators. As part of the mega-merger between Nokia and Alcatel-Lucent, Mr. Suri said that in a way to bring operating synergy to the merged entity and reduce overlap, the company will “focus on efficiencies and costs” going forward. The company is already cutting thousands of jobs worldwide in an effort to save €1.2 billion in 2018.

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About the Author

Kishalaya Kundu

Senior Staff Writer
I've always been a tech buff and have been building my own PCs since as far back as I can remember. My first computer was a home-built desktop running MS-DOS on which I learnt to program in GW-BASIC and my interests apart from technology include automobiles and sports.
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