Nokia's (NYSE:NOK) first-quarter earnings fell short of expectations due partly to decreased demand for its network gear, and the company said slowing sales in China will weigh down revenues during the rest of the year.
The Finnish firm posted a first-quarter loss of $583.5 million in its first unified earnings report since its January acquisition of Alcatel-Lucent, down from the $201.4 million profit from the prior year. But Nokia said costs related to the acquisition were largely to blame, and that net profit would have been $158 million had those costs, among others, been excluded.
Net sales were $5.89 billion, down 8 percent year over year and shy of analysts' estimates of $6.27 billion, and first-quarter revenue of $6.38 billion also fell short of expectations. Total group operating profit of $393 million was roughly in line with analysts' expectations, however.
Nokia also bumped up its predicted savings from the acquisition slightly, saying it expects the deal to save more than $1 billion by 2018. Indeed, the company recently announced plans to cut thousands of jobs globally as part of an effort to save more than $1 billion in the wake of closing the acquisition.
Like other legacy vendors of mobile network gear, Nokia faces a market where carrier demand is slowing as LTE buildouts slow in regions such as China, the U.S. and Western Europe. And Nokia is challenged not just by giants like China's Huawei and Sweden's Ericsson but also by a shifting industry focus to new markets like the Internet of Things and changes to network designs that increasingly focus on software.
"While our revenue decline was disappointing, the shortfall was largely driven by Mobile Networks, where the challenging environment is not a surprise," Nokia CEO Rajeev Suri said in a prepared statement. "We noted in our Q4 2015 earnings release that we expected some market headwinds in 2016 in the wireless sector and we continue to hold that view today."
Nokia continues to diversify in an effort to better compete in the dynamic market. It recently said it will spend roughly $191 million to purchase Withings, a French vendor of connected devices and services, and it launched its CloudBand software portfolio, which is aimed at enabling service providers to mix and match vendors, including Nokia's competitors.
Shares of Nokia were essentially flat following the release of its quarterly earnings.
Nokia enters digital health market with $191M purchase of France's Withings
Nokia launches new CloudBand software portfolio
Nokia to cut thousands of jobs worldwide in effort to save $1B following Alcatel-Lucent acquisition
Nokia CEO: Very little 'angst and in-fighting' in Alcatel-Lucent merger process
ADVA, Cisco, Ericsson, Nokia, others to tout solution-based approach to NFV, SDN at MWC
Nokia chief warns of post-merger job cuts and headwinds in infrastructure market