Nokia Slumps After Predicting More Gloom for Network Makers

Nokia Slumps After Predicting More Gloom for Network Makers
Nokia

The wait for a recovery in the wireless-network equipment business just got longer with Nokia’s dire third-quarter results, according to Bloomberg.

The Finnish manufacturer predicted a prolonged slump for the industry, sending its shares down as much as 16 percent, the most since 2012. Now focusing on networks, Nokia faces a tough market as phone carriers are largely done with building their newest systems, and time isn’t ripe yet to start spending on the next-generation.

Nokia lowered its view for the network market’s decline this year and forecast little improvement in 2018, predicting a continued drop of as much as 5 percent. That’s a disappointment for investors expecting an industry rebound after several years of shrinking sales or meager growth. Nokia’s warning follows that of struggling Swedish rival Ericsson, which last week predicted an 8 percent drop in demand for wireless-network equipment this year.

Nokia also reported third-quarter sales that trailed analysts’ estimates. Operators are reluctant to upgrade their systems to add data speed and coverage as they wait for a maturing of the 5G technology, which will allow for new types of services such as connected machines and remote-controlled surgery. Those are still a few years away.

Revenue at Nokia’s network division declined 9 percent last quarter, with the company citing challenges in North America and China. “Robust“ competition in China is set to weigh on fourth-quarter results, the company said, as equipment makers jostling for position ahead of the transition to 5G are discounting gear to win customers.

Total revenue shrank 7 percent to 5.54 billion euros. Adjusted earnings more than doubled to 9 cents a share, topping estimates, helped by cost cuts and patent-licensing revenue. Nokia Technologies, the unit in charge of patent licensing, boosted revenue 37 percent to 483 million euros after the company struck deals with LG and Apple for the use of its intellectual property.

Nokia said it plans to pay a dividend of 19 cents a share for 2017, up from 17 cents for the previous year. Their net cash position fell 51 percent to 2.73 billion euros in the quarter. Shares of Nokia fell 15 percent in Helsinki, while Ericsson lost 5.1 percent in Stockholm. The declines wiped out this year’s gains for both stocks.