A Challenging Quarter for Nokia
In its third quarter of 2020 financial report, Nokia warns it faces a financially challenging 2021. The company said it needs to pump further funds into 5G R&D as well as a sweeping restructure of its business units and strategy to boost alignment with its customers.
CEO Pekka Lundmark said the overhaul of the business would see it scrap a strategy of providing end-to-end solutions across its units, in favour of a more focused approach where each business segment would have to be competitive in its own right, both in terms of market position and profitability. “The goal of this new model is to better align with the needs of our customers, and through that improve our performance and create shareholder value,” he added. “The changes optimise our operating model for better accountability and transparency, increased simplicity and cost-efficiency.”
Under the new structure, the company will create four core business units: Mobile Networks; IP and Fixed Networks; Cloud and Network Services; and Nokia Technologies. Its Mobile Networks division will be led by its current president of mobile networks Tommi Uitto, and will target leadership in virtualised and open RAN, and 5G. Current president of customer operations EMEA and APAC Federico Guillen will lead its IP and Fixed Network division; with Nokia Enterprise president Raghav Sahgal to take charge of Cloud and Network Services, which includes segments already under his control. Jenni Lukander remains president of Nokia Technologies, a division largely unchanged. All changes will take effect from 1 January 2021.
The overhaul was announced alongside the vendor’s Q3 results, where net profit actually increased 33 percent year-on-year to €350 million, though its sales dropped 7 percent to €5.3 billion. Although Lundmark noted it was making good progress in some areas, he also pointed to what he described as lost share at one large North American customer, potentially a reference to Verizon, which recently signed a huge deal with rival Samsung. He also noted Nokia was experiencing margin pressure in the region.
“When I look ahead, however, the good progress we have made is not enough,” he added. “Our financial performance in 2021 is expected to be challenging, and more change is needed. The company will invest whatever it takes to win in 5G. I have no doubt that the potential of Nokia is substantial, even if delivering on that promise will take time. “We expect to stabilise our financial performance in 2021 and deliver progressive improvement towards our long-term goal after that.”