Nokia gets on 5G growth path as new strategy takes shape

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Nokia to cut up to 10 000 jobs by 2023
A view of the logo at the headquarters of the Finnish telecoms company Nokia in Espoo, Finland March 16, 2021. Lehtikuva/Heikki Saukkomaa via REUTERS
  • Q1 revenue 5.08 bln euros vs estimate of 4.72 bln
  • Q1 adj EPS 0.07 euro cents vs estimate of 0.01
  • Comparable margins up at 38.2% vs 36.4% last year
  • Shares jump as much as 16%

STOCKHOLM, April 29 (Reuters) - Nokia's (NOKIA.HE) new strategy showed early signs of bearing fruit on Thursday, with higher first-quarter sales of network and 5G equipment sending its shares soaring as much as 16%.

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"This year we are seeing great demand in 5G and also in what we call network infrastructure which is basically fiber connections to homes and offices," Chief Executive Pekka Lundmark said in an interview.

After taking the top job last year, Lundmark has streamlined Nokia's operation, cut jobs, and made changes to recover from product missteps under previous management that hit the company's 5G ambitions and share price.

Quarterly revenue rose 3% to 5.08 billion euros ($6.16 billion), beating analysts' consensus forecast of 4.72 billion, according to IBES data from Refinitiv.

Network infrastructure sales, which include optical and fixed network products, jumped 28% to 1.73 billion euros.

"These are a solid set of results and a good start to the year for Nokia," said Richard Webb, an analyst at CCS Insight. "In particular the operating margin of 11% looks healthy and shows that the restructuring is having some positive impact."

At 1345 GMT, Nokia shares were up 13.7% at 4.057 euros, after trading as high as 4.1435 euros.

LESS SEASONALITY

"We expect our typical quarterly earnings seasonality to be less pronounced in 2021," Lundmark said.

The demand for infrastructure, boosted by the pandemic, is now spread out through the year, easing seasonality, which previously resulted in outsized growth in the fourth quarter.

Growth in the second half of year will take a hit from one North American customer, the company said. Last year, Nokia lost a part of a contract with Verizon (VZ.N) after Samsung (005930.KS)unexpectedly landed a $6 billion deal.

"We are able to mitigate a lot of the impact of North American market share, but this is not something that will happen in one or two quarters," Lundmark said on a conference call.

Quarterly profit rose to 5 euro cents per share while adjusted profit was 7 euro cents per share. Analysts had expected an adjusted profit of 1 euro cent.

"This was supposed to be the bad year, but now it got off to a good start ... the market clearly now believes in Nokia’s goals more than before and maybe even sees them as somewhat conservative because the Q1 was so strong," said OP Markets analyst Kimmo Stenvall.

($1 = 0.8244 euros)

Reporting by Supantha Mukherjee, European Technology & Telecoms Correspondent, based in Stockholm; editing by Niklas Pollard

Our Standards: The Thomson Reuters Trust Principles.

Thomson Reuters

Supantha leads the European Technology and Telecoms coverage, with a special focus on emerging technologies such as AI and 5G. He has been a journalist for about 18 years. He joined Reuters in 2006 and has covered a variety of beats ranging from financial sector to technology. He is based in Stockholm, Sweden. 

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