Nokia Oyj raises profit guidance with a 5G comeback plan

(Bloomberg) — Nokia Oyj bumped up its full-year earnings guidance after slashing costs and overhauling its products to catch up with rivals in the market for fifth-generation wireless networks.

The company expects diluted earnings per share of 0.25 euro cents, plus or minus 5 cents, versus a previous projection for 0.23 euro cents. Adjusted operating profit for the second quarter was 423 million euros, beating average analyst estimates of 289.8 million euros according Bloomberg-tracked ratings.

Key Insights

Chief Executive Officer Rajeev Suri’s last results as CEO mark a low-point for Nokia after it lost ground to competitors in 5G mobile networks and the coronavirus disrupted supply chains and dampened investment.“Nokia-level revenue was down in the quarter” largely due to Covid-19 and China declines, Suri said in the statement. “We expect that the majority of sales missed in the quarter due to Covid-19 will shift to future periods.”Its fortunes are set to improve as a new low-cost radio-access base station puts it back in the game on 5G and chief rival Huawei is forced out of key European markets by a U.S.-led boycott campaign. That company’s struggles may be one reason Nokia can upgrade its guidance.Nokia said it expects to slightly underperform its primary addressable market, excluding China. Previously it had said it expected to perform in line with the market.

Market Context

Nokia shares were up about 4% for the year through Thursday’s close. More analysts are advising clients buy the stock than are recommending a hold or a sell stance.

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Suri’s replacement, Pekka Lundmark, takes over on Aug. 1 and is expected to begin a review of strategy. Suri’s biggest move was to buy rival Alcatel-Lucent in 2016, a deal that gave Nokia a wider product portfolio but required a complex integration process that, according to analysts, distracted management just as the 5G race was beginning.Nokia’s second-quarter net sales were down 11% from a year earlier to 5.09 billion euros ($6.05 billion), compared to an average analyst forecast of 5.31 billion euros.Nokia reported an operating margin of 9.5% plus or minus 1.5 percentage points, against a previous midpoint of 9.0%.See the numbers here.Nokia Cuts 1,200 French Jobs in Former Alcatel-Lucent BusinessHow Nokia’s Alcatel Deal Has Come Back to Haunt Its CEO.

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