Nokia says network infrastructure demand may pick up in 2024

(Bloomberg) — Nokia Corp said its results are likely to pick up in the second half as its network infrastructure business reaps the rewards of sales and cost-cutting measures.

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Telekom Finland said it expected adjusted operating profit of 2.3 billion euros to 2.9 billion euros ($2.5 billion to $3.2 billion) in 2024, according to a statement on Thursday. Analysts had expected profit indicators to remain stable at about 2.4 billion euros compared with the same period last year.

In early trading in Helsinki, the stock rose 7.6% to 3.39 euros, its biggest gain in 18 months.

Nokia has had a difficult 2023, with mobile carriers slow to adopt 5G equipment and locked in legal disputes with several smartphone makers including Oppo and Vivo over patent fees. Net profit for the year fell to 679 million euros from 4.3 billion euros in 2022. Revenue fell to 22.3 billion euros from 24.9 billion euros.

“Looking ahead, we expect the challenging environment in 2023 to continue in the first half of 2024, particularly in the first quarter,” Nokia Chief Executive Pekka Lundmark said in a statement, which also announced a A share buyback program worth €600 million. the next two years.

The company said there were positive signs that sales could increase in the second half of the year, which the statement called “green shoots.”

Lundmark said in an interview that Nokia has also been steadily increasing its market share in the 5G field. Although investment is slow, mobile operators will have to upgrade their networks to 5G over the years. “I absolutely believe it’s just a matter of timing before we get there,” Lundmark told Bloomberg.

Read more: Ericsson sees weak demand in 2024 as investment is ‘unsustainably low’

According to Bloomberg:

Nokia’s fourth-quarter results and 2024 outlook reflected the already well-known demand headwinds it faces, particularly from mobile operator customers. Management’s comments on “green shoots” and a 2H recovery led by its network infrastructure business may bring some optimism, but the consensus is “€2.35” comparable operating profit is unlikely to improve in 2024, although it’s at Nokia The bottom end of the target range of 2.3 to 2.9 billion euros.

-Matthew Bloxham, BI Media and Telecommunications Analyst

The company recently missed out on a $14 billion contract to modernize AT&T’s wireless network that went to rival Ericsson AB. There are concerns that the deployment of OpenRAN will give operators more flexibility in choosing the suppliers that supply their antennas and infrastructure, opening up a Nordic duopoly to rivals.

“We haven’t seen an influx of new competition from OpenRAN yet,” Lundmark said. “Will it come? Yes, it will, but I don’t think it’s going to be an overnight revolution.”

Previously, fourth-quarter results were better than expected, with the company reporting adjusted operating profit of 846 million euros, higher than analysts’ expectations of 762.7 million euros, according to average estimates compiled by Bloomberg. The company had warned it would not give an outlook for full-year sales, operating margins and free cash flow in a statement last month.

Nokia said on Wednesday it had signed a 5G patent cross-licensing agreement with Oppo, resolving a years-long dispute between the two parties. Lundmark said the company is close to resolving another similar dispute, the statement said.

The company’s shares have fallen about 25% in the past 12 months through Wednesday.

(Stock updates, fifth segment CEO interview and analyst commentary)

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