Nokia’s fourth-quarter results were better than its main European rival Ericsson, and it's optimistic that 5G will make a decent dent in sales before too long.
The company posted a 2% net sales growth in the fourth quarter of 2017, driven by IP networks/applications and its ultra broadband networks division. Fourth-quarter group operating profit rose 7%.
In the Networks unit, Nokia expects its market to decline again in 2018, but at a slower rate than its previous forecasts, given early signs of improved conditions in North America.
“For 2019 and 2020, we expect market conditions to improve markedly, driven by full-scale rollouts of 5G networks,” Nokia CEO Rajeev Suri said in prepared remarks. “As those rollouts occur, Nokia is remarkably well-positioned. Unlike previous generations of technology, 5G requires a coordinated, holistic approach across all network elements, far beyond radio. That requirement plays to the strength of our end-to-end portfolio and our 5G Future X architecture.”
In its Networks division, Nokia saw sales growth in several of its six geographic regions, though North America was down 2%. “Despite the decline in North America in Q4, year-on-year net sales improved significantly from Q3,” Suri said during the earnings call. “We see some positive signals coming from North American customers, and the desire to move fast to 5G is certainly there.”
While Europe is likely to remain soft, in China, there was good year-on-year growth in Q4 and given the robust competition there, “we continue to watch things closely,” with a focus on getting the right balance between market share and financial performance, he said, reiterating that it’s not about gaining market share at any cost.
Nokia has a pretty good sense of what will happen with 5G and in what countries, starting with leaders in U.S., China, Japan, South Korea, Nordics and some parts of Europe that will follow. “We’re getting a good sense of what that is sort of going to be like," he said. "It is clear the demand is there on the basis of capacity increase,” as well as from the B2B environment where industrial, utility and transportation companies are asking operators to give them 5G capability from a capacity and latency perspective.
“Of course, we look at it differently from another peer or some other peers because we have an end-to-end portfolio. This really is a reinvention of the network as we know it,” he said. “Our operators, if they go end-to-end with us, will get the benefit of a lower TCO, so total cost of ownership, [and] a higher throughput at the network level, not just at the radio level but at the network level.”
Nokia just this week announced its new ReefShark chipsets, which incorporate Nokia Bell Labs artificial intelligence (AI) technology as well as Nokia's capabilities in antenna development for mobile devices and base stations. Nokia says the ReefShark chipsets significantly improve the performance of antennas, resulting in halving the size of massive MIMO antennas and reducing power consumption in baseband units by 64% compared to today’s units.
Suri also talked about Nokia’s expertise in network slicing, a key component of 5G.
“There will be thousands and thousands” of network slicing, perhaps millions in the future, he said, and “our operators will be able to tap into the demand” of an SLA-based business where they can give slices to a group of clinics or hospitals, for example, including regionally and globally. “We would be able to slice the network at the network level,” he said, adding that somebody else who doesn’t have an end-to-end portfolio would only be able to do that at the core network of the radio, and that’s not good enough.