Nokia (NYSE:NOK) elevated soft-spoken yet intensely competitive Rajeev Suri to its president and CEO position, which was no surprise given his deft handling of the turnaround at the firm's network infrastructure unit, which he has led since 2009. Suri will assume the combined role on May 1.
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Suri told The Wall Street Journal that Nokia's strong cash position, gained from the $7.5 billion (5.4 billion euros) deal to sell its struggling handset business to Microsoft (NASDAQ: MSFT), positions it to acquire smaller firms to fill gaps in its product portfolio. The Microsoft deal closed on April 25.
Some analysts have suggested Nokia could try to acquire rival Alcatel-Lucent (NYSE: ALU) or its mobile products assets. Suri told Reuters: "In terms of larger players, if there is something that makes sense, of course I will recommend that to the board. But ... it needs to be a wisely thought-out thing."
Michael Soper, networking and mobility analyst at Technology Business Research, observed that Nokia's "lack of IP routing technology is an area of weakness" when bidding against other major network equipment providers such as Ericsson (NASDAQ: ERIC) and Alcatel-Lucent.
Therefore, Nokia could seek to acquire Juniper Networks, whose edge and core routers it resells, Soper said. He added the company might also pursue smaller firms focused on software-defined networking (SND) and network functions virtualization (NFV).
Suri noted Nokia's three remaining businesses--networks, its navigation business HERE and technologies, which is its patents business--all have opportunities for organic growth. Nokia Solutions and Networks, which Suri formerly headed, will be known as Nokia's networks division from now on.
"I have been with the company for almost 20 years, and the opportunities in front of us are as great as I have ever seen," Suri said in a conference call with investment analysts. He said Nokia is in a strong position to achieve leadership in new technology areas while maintaining its strong foundation.
"We start this new journey with an unparalleled IP licensing and creation engine that has new potential in a company without devices, a location and mapping business that is already an industry leader and that has strong growth opportunities, a networks business that is performing well and on a path to better top-line performance, and a deep innovation capability across all part of the company," he said.
Nokia also released first-quarter 2014 earnings that showed net profit from Nokia's continuing operations coming in at $152 million, up from a loss of $232.2 million a year ago. Discontinued operations, including the handset division, lost $468.6 million during 2014's first three months.
Nokia intends to distribute more than $4 billion to investors from proceeds of the handset unit's sale. The firm suspended its dividend last year due to a cash crunch.
Networks posted a 17 percent year-on-year sales decline during the first quarter, but Suri noted that slip would have only been 6 percent excluding items such as negative currency adjustments, divestments as well as the exiting of certain customer contracts and countries.
Mobile broadband sales were down 22 percent for the quarter, which Nokia said was largely attributable to a reduction in network implementation and maintenance activity, consistent with lower levels of large scale network deployments. The company also noted that mobile broadband net sales were adversely affected by shortages of certain components, which will impact the business at least through the end of the second quarter. Global services sales were up 44 percent.
Geographically, networks saw revenues rise year-on-year only in greater China, where net sales grew 25 percent compared to the first quarter of 2013 thanks to the rollout of TD-LTE networks.
Net sales in North America declined 38 percent primarily due to a cyclical slow-down in LTE rollouts; were down 30 percent in the Middle East and Africa due to the focus on a specific set of countries; fell in Latin America 28 percent due to constrained operator spending and the exit of certain projects; slipped in Europe 14 percent due to contract exits in line with Networks' strategy and constrained operator spending; and declined in Asia Pacific 12 percent due to a decline from the height of the LTE network rollouts in the first quarter of 2013 in Korea.
Risto Siilasmaa, Nokia's chairman, has served as interim CEO of Nokia since last September, when Stephen Elop left the position after news that the handset division would be sold. Elop is now executive vice president of Microsoft's devices group.
For more:
- see FierceWirelessEurope's take on this story
- see this Nokia CEO release and this earnings release
- see this Nokia networks release
- see this Wall Street Journal article
- see this Reuters article
- see this Bloomberg article
- see this GigaOM article
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Article updated April 29, 2014, to add analyst comments and on April 30, 2014, to add additional information from the networks unit.