Nokia sales top estimates as network slump begins to ease

Bloomberg

Nokia Oyj reported first-quarter sales that topped analysts’ estimates as a slump in wireless-network demand began to ease and the company reaped more revenue for its patents.
Revenue fell 4 percent to 5.39 billion euros ($5.9 billion),
the Finnish network-equipment maker said on Thursday. Analysts predicted 5.28 billion euros, the average of estimates compiled by Bloomberg. Earnings of 3 cents a share matched the average analyst prediction.
The revenue decline in the networks unit, by far Nokia’s biggest business, slowed to 6 percent from 14 percent in the previous quarter. That contrasts with a 13 percent network-sales drop reported by Swedish rival Ericsson AB, signaling Nokia is having better success at winning contracts in a tough market.
“The renewed momentum in mobile networks in the quarter is certainly positive signal,” Chief Executive Officer Rajeev Suri said on a call with reporters. “Nokia’s strong position in the mobile market can be seen in our great first-quarter conversion rate of pipeline opportunities to deal wins.” Shares of Nokia rose as much as 7.1 percent, the biggest intraday gain since June. They added 6.1 percent to 5.28 euros at 11:52 a.m. in Helsinki.

CONTRACT WINS
Nokia’s purchase of Alcatel-Lucent SA for $18 billion last year may be helping the Finnish company cope better with the slump than Ericsson. The acquisition gave Nokia fixed-broadband assets, helping it deliver more complete network systems. That end-to-end portfolio makes Nokia a more strategic partner to carriers, Suri said.
Last month, Veon Ltd. awarded Nokia a network-management deal in central and southern Russia as part of an arrangement that saw the phone carrier terminate its contract with Ericsson early.
“It’s a good situation for Nokia, as Ericsson is going through a quite significant reorganization,” said Daniel Djurberg, an analyst at Handelsbanken in Stockholm. “It’s possible that they can gain some market share, but you shouldn’t forget the other players, like ZTE.”
While China’s Huawei Technologies Co. has become the main rival to Nokia and Ericsson, ZTE Corp. was tapped for a $1 billion contract to merge and manage Italian mobile networks operated by CK Hutchison Holdings Ltd. and Veon. The Chinese competitor’s win was a blow to Ericsson, which has business with both carriers.

NEW SOURCES
Nokia said wireless carriers showed interest in its faster systems, designed to help operators cope with the increasing usage of mobile data and video. Still, the next growth driver for the industry, so-called 5G networks, is years away as the technology is being developed.
The company said it ended the quarter with 145 customers for 4.5G networks, an intermediate step toward 5G systems that will enable quicker and easier communication between machines, from cars and traffic lights to refrigerators and thermostats. Q1 sales at Nokia’s Technologies unit, in charge of its patents, expanded 25%. The division collects revenue for trove of intellectual property related to mobile phones, a business Nokia used to dominate but exited a few years ago.
That division also makes health products such as fitness bands and connected scales after acquiring the Withings consumer-products business last year, and collects licensing revenue from Finnish company HMD Global Oy, which makes Nokia-branded mobile phones.
Nokia said it still expects “low single-digit” percentage decline for the network division this year, and reiterated its profitability forecast for the year. The company predicts a networks operating margin of 8 percent to 10 percent. “We saw encouraging stabilization in Mobile Networks topline,” Suri said in a statement. “I am optimistic about the year ahead, even if cautiously so.”