Nokia Q4 Preview: Cost Cutting, Early 5G Deployments In Focus

by Trefis Team
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Wireless equipment maker Nokia (NYSE:NOK) is expected to publish its Q4 2018 results on January 31, reporting on a quarter that could see its networking business post higher growth, driven by the deployment of 5G services in the North American market. Below we take a look at some of the trends that we will be watching when the company publishes earnings.

Our interactive dashboard on what Nokia’s outlook is like details our expectations for the company over the next two years. You can modify any of our key drivers and assumptions to gauge the impact of changes on the company’s results and valuation.

Networks Business Should Pick Up On 5G Deployments

Nokia’s bread-and-butter Networks business saw a mixed performance over the third quarter. While revenues from the segment grew by 3% year-over-year on a constant currency basis to 4.89 billion euros, gross margins fell 270 bps to 35.9%, on account of weaker pricing. That said, things should pick up over Q4 as Nokia has indicated that it expects demand from North America to increase, as commercial 5G network deployments commence. While Nokia projected that the networking market would decline by about 3% over 2018, the company has indicated that its primary addressable market should grow on a constant currency basis over 2019 and 2020, and we will be looking for updates on its 2019 outlook.

Much like rival Ericsson, Nokia meaningfully reduced its costs through the downturn in the radio access network (RAN) market. While the company was on track to meet its EUR 1.2 billion ($1.37 billion) cost savings program by the end of 2018, it also announced a new cost-saving initiative, with plans to cut costs at an annual rate of 700 million Euros ($795 million) by the end of 2020. The company is looking towards digitization, automation and more process and tool simplification to drive savings, while indicating that it would cut thousands of jobs across the globe. We will be looking for updates from the company on this front.

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