Finnish hardware maker Nokia (not to be confused with HMD Global’s Nokia brand) has today announced its fourth quarterly earnings and they aren’t as rosy as one would’ve expected. The company posted profit and sales figures better than those expected by market analysts. It mainly reflected the financial changes that were due to its Alcatel-Lucent purchase and cost cutting to further its efforts in the networking segment.
In the fourth quarter, the Nokia group operating profit declined by 27% to 940 million euros (approx $1.01 billion) as compared to this quarter previous year. It, however, managed to beat market expectations of 788 million euros set forth by the Reuters poll. The sales figures for this quarter fell to 6.715 billion euros from 7.7 billion euros in the same quarter from a year ago. This is nearly a 14 percent decrease on a year-on-year basis. Also, the margins for Nokia dropped to 14 percent from 16.6 percent. It should be taken into account that these numbers are before adjusting the interest and taxes (EBIT).
These figures were attributed to higher costs in areas of R&D, selling, general and administrative, partially offset by higher gross profit, all primarily related to the Alcatel-Lucent deal.
As for individual entities operating under Nokia, the networking business fought against challenging market conditions. Thus, the sales for the same were down 14 percent amounting to 6.1 billion euros. It was further supplemented by a 25 percent decrease in sales for Nokia Technologies. This amounted to over 309 million euros, thanks to extension of licencing deal with Samsung and the acquisition of yet another company — Withings.
Further, CEO Rajeev Suri commented on the progress saying that Nokia is positive about the integration of Alcatel-Lucent in the company’s networking assets. He has also expressed his delight over the great reception of customers for the new group and its strategies to court better business opportunities. The group entity is focused on further cost cutting to offset weaker market conditions and stay competitive. Talking about his outlook for the future, he added that Nokia will resurface again,
with solid opportunities to drive higher returns through expansion into new customer segments; with emerging businesses in digital health and digital media; and with greatly expanded patent and brand licensing activities.
This was the year Nokia shifted its core strategy from being mobile-focused to now accommodating a wide variety of technologies including mobile, software, network, and others under one umbrella. The company initiated patent licensing complaints against Apple as well, suing the tech giant for infringing on 32 of its mobile patents. It also further extended the power to license hand-held devices to Finnish counterpart HMD Global in 2016.
Talking about the earnings report, Nokia President and CEO Rajeev Suri said,
While I remain disappointed with our topline development in 2016, we continue to expect our performance to improve in 2017 and see the potential for margin expansion in 2017 and beyond, as market conditions improve and our sales transformation programs gain further traction.
Nokia is, however, looking forward for an improved performance in 2017. With the increasing demand for 5G technology across the globe, the company plans to push for a better fiscal year driven by its acquisition of U.S-based Eta Devices. The company has achieved success on the VR front with its professional grade 360-degree OZO camera. And 2017 will most likely be found used on expanding on these technological advancements, with a focus on leaner operations.