Nokia boosts Q2 profits as North American network sales jump 16%

Nokia (NYSE:NOK) reported stronger sales overall in its core networking business and a strong increase in sales in North America. The company had its most profitable quarter overall since it sold its handset business to Microsoft (NASDAQ: MSFT) in April 2014, according to Nokia CEO Rajeev Suri.

The strong financial results come as Nokia is speeding along toward the completion of its $17.1 billion (€15.6 billion) deal to buy rival Alcatel-Lucent (NYSE: ALU).

Overall, Nokia said total sales grew 9 percent year-over-year to $3.5 billion, slightly lower than the $3.63 billion average of estimates compiled by Bloomberg. Nokia posted a net profit of around $384.7 million, compared to a net loss of around $30.7 million a year ago. The vendor's total non-IFRS operating profit surged 51 percent year-over-year to around $571 million. Suri said Nokia remains "highly focused on reducing costs and improving efficiency in order to mitigate the impact of market conditions."

Sales in the company's key networks unit grew 6 percent year-over-year to $3 billion. Nokia said that higher-margin software sales were up significantly in the quarter and core networking sales improved. Its global services business had one of its best quarters in the history of the company.

The network unit's operating margin increased to 11.5 percent from 11 percent a year ago and 3.2 percent in the first quarter. "A higher proportion of software sales for networks in the second quarter explains the jump in the unit's operating margin," Hannu Rauhala, an analyst at Pohjola Bank in Helsinki, told Bloomberg. "It's encouraging to see it heading in the right direction."

In North America, net sales in the networks business jumped 16 percent, primarily driven by higher net sales in global services, with particular strength in the network implementation business line, including business it acquired from SAC Wireless. Nokia's strength in North America was partially offset by lower sales for mobile broadband gear.

In August 2014 Nokia completed its deal for SAC Wireless, a wireless network equipment installation specialist, which the vendor said it made to deliver "revenue synergies." At the time the deal was made Nokia said the firm had proven expertise to complement its own in-house capabilities to self-perform services for carriers that are typically sub-contracted.

Last week The Wall Street Journal reported that Nokia had reached a deal to sell its HERE mapping and location technology unit to a group of German automakers for a little more than $2.74 billion.

Suri said only that "our strategic review of that business is now in an advanced stage, and I would like to reiterate that our focus is on what is in the best interests of our shareholders and the long term future of HERE." 

For more:
- see this Nokia release
- see this Nokia report (PDF)
- see this Nokia presentation (PDF)
- see this Bloomberg article
- see this FT article (sub. req.)

Special Report: Wireless in the second quarter of 2015

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