Nokia to split networks business in two as Elhage steps down

Nokia
Nokia announced the reorganization as it reported the impending departure of Elhage, who has served as president of its mobile networks business since late 2015.

Nokia said it will split its mobile networks group into two units as Samih Elhage steps down from his role as president of the business.

The Mobile Networks division will focus on products and solutions, the Finnish vendor said, while the Global Services unit will oversee the company’s network services. Nokia also said its innovation and operating unit will be divvied up three ways: Current operating activities will be moved to a newly formed COO organization, innovation pursuits will fall under the CTO’s purview and incubation will move to the company’s chief strategy officer.

The company announced the reorganization as it reported the impending departure of Elhage, who has served as president of Nokia’s mobile networks business since late 2015. A veteran of the telecom industry, Elhage has been with Nokia since 2012 when he was named the company’s COO.

“From helping lead the transformation at Nokia Siemens Networks and creating a disciplined operating model that remains a competitive advantage, to being one of the driving forces behind the acquisition of Alcatel-Lucent and its fast and successful integration, Samih’s contributions to Nokia have been remarkable,” Nokia CEO Rajeev Suri said in the announcement. “He has been a close friend and advisor through times both good and bad, and I fully support his desire for change.”

The restructuring comes as Nokia appears to be regaining its footing in a brutal worldwide market for telecom gear. Nokia’s fourth-quarter earnings before interest and taxes were $1.01 billion, down 27% year-over-year, but its net profit during the period was $682 million.

Vendors around the world have struggled over the last year as carriers have largely completed LTE build-outs in advance of 5G deployments. And operators in the U.S. generally cut back their capex investments last year due in part to an extremely competitive market.

Wells Fargo Securities Senior Analyst Maynard Um said the restructuring should give investors and analysts improved visibility to Nokia’s businesses.

“We believe the changes will provide better clarity between the performance of its networking equipment revenues by separating services out of the segment as well as improving services growth longer-term,” Um wrote in a research note to analysts. “We raise our valuation range to $5 - $5.50 from $4.50 - $5 driven by market multiple expansion, expectation for some improvement in U.S. network spend, and based on sum of the parts, but maintain our market perform (rating).”