On Thursday, Finnish telecom equipment supplier Nokia reported a 9% rise in third-quarter operating profit, beating forecasts, as it continued to cut costs and benefited from 5G rollouts. The company said many parts of its business are turning the corner, although some continue to experience market weakness. Net sales slid 7% to 5.4 billion euros, but Nokia kept its full-year comparable operating profit guidance at the lower end of a previously disclosed range.
Chief Executive Pekka Lundmark said demand is improving, especially in markets like India, where Nokia has strong market positions in mobile and fixed network technology. He said it also saw early signs of improvement in the fiber market in North America, where Nokia has a significant presence. “We have signed new important contracts there, and we are seeing positive trends in both the mobile broadband and fiber markets,” he said.
The results surpassed expectations, with profit at the Mobile Networks unit rising to 454 million euros in July-September from 305 million euros last year. The unit benefited from a stronger-than-expected performance in the 3G market and contract resolution benefits. The margin in the unit improved to 13.5 percent, up from 11 percent a year ago. The company’s more significant Networks Solutions business posted a comparable operating profit of 459 million euros, beating the average of 470 million euros expected by analysts in an LSEG poll.
Networks Solutions, which provides software for telecom networks and offers services such as maintenance, is one of the most profitable units in the group, accounting for about a fifth of overall operating profit. Its margins have been under pressure from a shift in operator spending toward more cost-effective alternatives to traditional routers, such as software-defined networking (SDN). Nokia is shifting its sales approach to focus on the most profitable markets, mainly data centers and virtual private networks.
In its outlook, the company remained cautious in light of a global shortage of semiconductors, which could impact demand for its crucial equipment products. It also warned of a continuing slowdown in China, which has a significant business. However, it maintained its 2023 comparable operating profit target of 14 percent, which would require a strong recovery in the Mobile Networks business and the Networks Solutions unit.
Siilasmaa, a high-tech veteran who was briefly a dollar billionaire on paper during the turn-of-the-millennium technology boom, took over at Nokia in 2008. He is the main reason the company has a future. He has kept the enterprise-focused by building trust among the board and top management team, treating anxious employees with transparency and fairness, and insisting on using facts and analysis to drive decision-making. No nonoil company may have ever claimed more of a single country’s GDP, tax base, and collective esprit than Nokia did at its peak in Finland. Siilasmaa’s calm, clear leadership has kept the company focused on its core strengths and is a big reason why it has a chance to reclaim its past glory.
