Nokia’s outgoing CEO marks surprise Q2 profit

Nokia sign (Nokia)
Nokia said it now has 83 5G deals. (Nokia)

Nokia President and CEO Rajeev Suri delivered his last quarterly earnings report Friday, saying the company achieved an unexpected improvement in profitability despite challenges related to COVID-19. Nokia’s net profit for the April-June period was up 22%, at $376 million.  

Espoo, Finland-based Nokia has been undergoing rough times as Swedish rival Ericsson grabs 5G market share. However, with European markets joining the U.S. in Huawei bans, its prospects in that regard should improve in the radio segment, as well as in core, routing and fixed services.

Nokia’s sales were down 11% in the second quarter, with the majority a result of COVID-19 as well as a sharp decline in China based on its “prudent” approach in that market. The expectation is that the majority of sales missed in the quarter due to COVID-19 will shift to future quarters as opposed to being lost entirely.

Nokia estimates the COVID-19 impact was about EUR 200 million in the first quarter and EUR 300 million in the second quarter.

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“These results show that our execution has improved as planned and that we are well positioned to end the year with a significantly stronger financial position,” Suri said in a statement. “As a result, we are adjusting upward both the midpoint of our full-year 2020 non-IFRS EPS and operating margin guidance within our previously disclosed outlook ranges.”

Suri also said the company saw “healthy improvements” in its radio portfolio, where costs are coming down and product performance is rising. “We have a particularly powerful portfolio in mid-band mobile radio, with proven products deployed with 55 customers, and the first live C-Band network demonstrated in the U.S. during the quarter,” he stated.

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With the Sprint/T-Mobile merger coming together and clarity in the second half, “we see that the ramp-up will increase in both low-band [spectrum] with that particular operator but also the mid-band… In Q2 it was a bit soft, especially in services,” but if they get clarity of their roadmap, that will accelerate things in the second half, Suri said during the earnings conference call Q&A.

Asked specifically about Verizon and whether given the 2020 guidance, its relationship remains solid and on track for 5G per prior plans, Suri said Nokia does not comment on its customers’ vendor strategy. A report surfaced earlier this month that Nokia could lose out on a key 5G radio access network (RAN) contract with Verizon if it gets awarded to Samsung.

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Nokia is committed to help Verizon build the most reliable, highest performing network and “we work with them across multiple technologies,” and “we have a long-standing strategic partnership,” Suri said. In addition, “we play a critical role in Verizon’s 4G network and continue to work with them to accelerate innovation around 5G technology.”  
Nokia said its “5G Powered by ReefShark” shipments continue to increase and it now has 83 5G deals. When it reported second-quarter results two weeks ago, Ericsson said it had 99 commercial 5G contracts and 54 live 5G networks working across 27 countries.

Nokia’s incoming president and CEO, Pekka Lundmark, officially starts tomorrow. Lundmark most recently served as president and CEO of Fortum, an energy company. Prior to that, Lundmark was president and CEO of Konecranes, a global material-handling company. From 1990-2000 he held multiple executive positions at Nokia, including VP of strategy and business development.