Nokia's CEO acknowledged that the company lost a "small number" of Verizon's markets but argued that the company is not losing share to rivals in its critical North American market.
“We still have a very strong position with Verizon and are working closely with them on 5G,” Nokia's Rajeev Suri said on the company's quarterly conference call, according to Bloomberg. “Any suggestion that Nokia is losing share as a result of a fundamental issue of product competitiveness is simply incorrect."
The statements by Nokia's Suri followed an announcement by Ericsson that it recently won additional markets from Verizon, and a separate announcement from Samsung that it would supply equipment for Verizon's launch of 5G in Houston.
Suri's statements coincided with the release of Nokia's second-quarter earnings. Nokia reported second-quarter financial results below most Wall Street expectations, but the company’s CEO promised that the equipment vendor would enjoy a stronger second half of 2018 thanks in part to growing sales of 5G gear.
Indeed, it was Nokia’s outlook for the remainder of the year that stood out in its second-quarter report. The company said it expects to score gains on the sale of 5G equipment in North America and elsewhere, but that pricing pressures in its networks business will likely continue.
“Nokia’s second-quarter 2018 results were consistent with our view that the first half of the year would be weak followed by an increasingly robust second half. Pleasingly, I am able to confirm that we expect to deliver 2018 results within the ranges of our annual guidance,” Suri said in a statement from the company. “We expect market conditions to improve further in the second half, particularly in Q4, Nokia’s seasonally strongest quarter, and as 5G accelerates significantly.”
Overall, Nokia reported that its operating profit in the second quarter dropped 42% from a year ago, which Reuters noted missed analysts’ expectations.
Nokia’s networks business, which accounted for fully 88% of sales during its most recent quarter, posted a quarterly operating profit margin of 1.5%, also below expectations. The company promised “improving market conditions in the second half of 2018, with particular acceleration in the fourth quarter in North America, following weakness in the first half of 2018.”
However, Nokia also warned that “recovery actions to address increased price pressure, including the ability to offset price erosion through cost reductions.”
North America remains Nokia’s biggest market for network sales, accounting for 31% of the company’s business in the second quarter.
Nokia’s results largely dovetail those of Ericsson. “We have good market traction in Networks, with a sales growth of 2%, particularly in North America where all major operators are preparing for 5G,” Börje Ekholm, Ericsson’s president and CEO, said in a statement released in conjunction with Ericsson’s second-quarter earnings earlier this month.
Of course, it’s no surprise that North America remains a bright spot for both Nokia and Ericsson because the companies don’t have to compete with China’s Huawei in the United States. Huawei, of course, has been the target of security concerns for years among the U.S. intelligence community, and the Trump administration has created further problems for the company with its brewing trade war with China.
Article updated July 26 with additional commentary from Suri.