Nokia has lowered its forecasts because high investments will be necessary for 5G. “We have been in catch-up mode with 5G for some time. We will catch up next year.” This is what Pekka Lundmark, head of Nokia since August , told the British Financial Times . They will invest what is necessary to “win in the 5G sector” , where the Finnish telecommunications supplier has fallen behind Huawei and Ericsson.
“When I look ahead, I realize that the progress we have made is not enough,” said Lundmark when presenting the quarterly results on October 29, 2020 . For the year as a whole, Nokia expects earnings per share to be EUR 0.02 lower than forecast. Nokia shares fell 17 percent on Thursday morning. The Finnish group reduced the operating profit margin for 2020 from 8 to 10 percent – after a previous outlook from 8 to 11 percent. A margin of 7 to 10 percent was forecast for 2021.
Nokia: No more end-to-end solutions
The profit rose in the third quarter to 197 million euros, after 85 million euros in the same period last year. Sales fell by 7 percent to 5.29 billion euros. The operating profit rose by 2 percent to 486 million euros. The average forecast of the analysts of 5.42 billion euros for sales and 496 million euros for operating profit was missed.
Lundmark said he will abandon his predecessor Rajeev Suri’s strategy of providing end-to-end solutions for networks from cell towers to software. Instead, Lundmark split Nokia into four new business areas, each with their own responsibility for profit and loss: cellular networks, IP and fixed networks, cloud and network services, and the existing technology business, which focuses on the patent portfolio.
Samsung Electronics won a 5G contract from US network operator Verizon against Nokia. In September, the South Korean company signed its largest 5G contract to date: equipment worth $ 6.6 billion for Verizon’s radio access network (RAN) by the end of 2025 . In the USA, Huawei has never been able to act as a supplier to the major mobile network operators and has now been completely excluded from the market.