Nokia’s Earnings Crash On Account Of Industry Weakness

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Bogged down by weak carrier spending on mobile networks globally, Nokia’s Q2 earnings fell by 49%, much worse than expected. Immediately after reporting the results, the company uplifted its cost cutting goals, a significant portion of which will come from job cuts. Nokia has now set a target of saving EUR 1.2 billion by 2018, up from its earlier target of EUR 900 million. During the recently concluded quarter, sales for Nokia’s networks division fell across the globe, most notably in big markets of Europe and North America, where revenues were down 12%.

A significant improvement for Nokia’s networks business in the near term is unlikely given that its major source of revenues is a market that is losing its steam. The wireless infrastructure domain is going through a lull with global telecos not spending much on wireless networks. And the market is unlikely to present significant opportunities for the three majors (Nokia, Ericsson and Huawei) until a new cycle of network upgrades begins. While the near term looks grim for Nokia, it is indeed in a much better position than Ericsson, given its merger with Alcatel-Lucent. Nokia posses a strong product portfolio of both fixed and mobile networks, while its rival Ericsson lacks the strength in the fixed domain. The Finnish company’s merger with Alcatel-Lucent offers it a comprehensive product line with advanced research capabilities for the development for future technologies such as SDN and cloud computing.

Here’s a snapshot of Nokia’s results:

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Nokia earnings q2

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Nokia
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