What To Expect As Nokia Publishes Q3 Results

by Trefis Team
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Nokia (NYSE:NOK) is expected to publish its Q3 2018 results on Thursday, October 25. While the company has reported fairly weak earnings in recent quarters, with Networks sales declining on account of mixed market conditions (Nokia projects that the networking market will contract by 1% to 3% in 2018), there is a possibility that we could see some signs of improvement over the quarter. Below, we take a look at some of the key factors that could drive the company’s earnings for the quarter.

Our interactive dashboard on what Nokia’s outlook is like details our expectations for the company over the next two years.

Networks Business Could See Upside As Commercial 5G Deployment Begins

Over the second quarter, revenues from the Networks business declined by 6% year-over-year, although sales remained flat on a currency adjusted basis. However, things could improve in the near term, as commercial 5G deployments gather pace in the United States, with other markets also expected to see ramp-ups in 5G investments in the interim. It’s possible that Nokia could have some advantages going into the 5G upgrade cycle. For instance, the company’s installed base of its high-capacity AirScale product is growing fast, and this could enable customers to upgrade to 5G without replacing their hardware. Moreover, the company notes that about 40% of its sales pipeline consists of end-to-end deals, which encompass products and services ranging from IP, optics, RF, software and in-house silicon.

Patent Licensing Business 

While patent royalties have accounted for a relatively small proportion of Nokia’s total revenues in the past, they are becoming more meaningful to the company due to their higher margins and new deals that the company is striking. For instance, Nokia has expanded its licensing operations to markets including Chinese mobile OEMs and customers in the automotive sector. The company is looking to drive a compound annual growth rate of ~10% for recurring licensing net sales over the three year period ending 2020, and we will be looking for updates on how this business is faring over the quarter.

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