Nokia posts Q4 net profit of $682M, beats expectations

Nokia building
Nokia CEO Rajeev Suri said the company’s move to expand its offerings helped offset a brutal market for wireless network gear in 2016.

Shares of Nokia jumped more than 6% this morning after it posted a net fourth-quarter profit that beat analysts’ expectations. And the venerable Finnish vendor said the global market for telecom gear is finally beginning to stabilize.

Earnings before interest and taxes came in at $1.01 billion, Fortune reported, down 27% year over year but well ahead of analysts’ estimates of $850 million. And Fortune said sales fell shy of expectations by 14%, but operating margin of 14.1% beat estimates of 11.7%.

Nokia’s net profit was $682 million.

CEO Rajeev Suri said the company’s move to expand its offerings helped offset a brutal market for wireless network gear in 2016.

“At the start of the year, Nokia was focused primarily on mobile networks,” he said in a press release (PDF). “We ended the year as a company with a complete portfolio spanning mobile, fixed, routing, optical, stand-alone software and more; with solid opportunities to drive higher returns through expansion into new customer segments; with emerging businesses in digital health and digital media; and with greatly expanded patent and brand licensing activities.”

Nokia has also moved aggressively to cut costs after closing its $17 billion acquisition of Alcatel-Lucent a year ago. In April it announced plans to slash 1,300 positions in Finland as part of an effort to save more than $1 billion, and Suri said the integration of the two companies was completed “faster than anticipated.”

The earnings report caps a tough year for Nokia, though. Net sales in the first quarter of 2016 were down 8% year over year and shy of analysts’ estimates, and the company followed that with a second straight quarterly loss during the subsequent period. Things didn’t improve much in the third quarter as sales fell to $6.5 billion led by a 12% drop in network revenue.

The market has been unkind to Ericsson as well. The Swedish vendor posted a fourth-quarter net loss of $181 million as sales were down 10% for the full year of 2016.

Suri suggested the worldwide market will gain momentum, though, as mature markets begin to enter the 5G era and as LTE penetration ramps up in some emerging markets.

“While I remain disappointed with our topline development in 2016, we continue to expect our performance to improve in 2017 and see the potential for margin expansion in 2017 and beyond, as market conditions improve and our sales transformation programs gain further traction,” Suri said.