Nokia Positive on Networks Despite Tough Outlook
Nokia CEO Pekka Lundmark pointed to growth in sales of its radio access products in Q4, but has also reiterated warnings to investors to expect a challenging 2021 as it implements a sweeping turnaround strategy. In its results statement, Lundmark said improved earnings from mobile access products in the final months of 2020 reflected ongoing efforts to strengthen the competitiveness and cost position in the area.
Despite improved sales of radio products, its mobile access activities as a whole were cited as the primary reason for a fall in revenue, with declines in network deployment and planning services. Across the business, Q4 revenue dropped 5 percent year-on-year to €6.6 billion, with Networks division sales down 7 percent to €5 billion. It slipped to a net loss of €2.6 billion from profit of €563 million in 4Q19, with the latest figure severely hit by booking a deferred tax-related charge of €2.9 billion, which it described as not lost, though it also recorded lower operating profit.
Nokia noted issues around the COVID-19 pandemic cost it €200 million in sales across the whole of 2020, though it noted these were mostly deferred purchases rather than abandoned ones. It also gained €250 million from a reduction in travel and personnel expenses. Looking forward, Nokia warned there would be a significant decline in earnings related to mobile networks in 2021, with issues expected in North America alongside intense competition in 5G.
Lundmark noted despite encouraging results towards the close of 2020 he expects 2021 to be challenging, a year of transition, with meaningful headwinds due to market share loss and price erosion in North America. “We took important steps in 2020 to accelerate roadmaps, improve execution and create a new way of working, which will enable Nokia to return to a sustainable long-term financial performance,” he added. “We know we have our work cut out for us in 2021, but the new group leadership team has hit the ground running.”