Nokia Q1 Preview: Early 5G Deployments In Focus

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Wireless equipment maker Nokia (NYSE:NOK) is expected to publish its Q1 FY’19 results towards the end of April, reporting on what is likely to be a transitional quarter for the company as 5G-related spending starts to ramp up. Here’s a quick rundown of what to expect and what Trefis will be watching when the company reports earnings.

What to expect from Nokia in Q1 FY’19

  • Consensus revenue expectations stand at around $5.68 billion, a slight year-over-year decline
  • Consensus EPS expectations of $0.02, almost flat year-over-year
  • New reporting structure: Networks, Nokia Software, and Nokia Technologies.

Why are earnings expected to remain sluggish in Q1?

  • While 4G spending has declined, the 5G rollout will be staggered, with deployments expected to gather steam in the second half of the year.
  • While Nokia is already providing hardware for 5G the U.S., with a total of over 70 5G trials underway globally, Japanese carriers are likely to commence their rollouts in Q2, with Chinese players beginning their 5G transitions later this year.

Will Nokia fare better over the full year?

  • Nokia guided for full year EPS of EUR 0.25 to 0.29 in FY’19, almost flat compared to FY’18
  • EPS is expected to rise to EUR 0.37 to 0.42 in 2020
  • Nokia expects its primary addressable market to remain flat over FY’19

Where does Nokia stand in the 5G market?

Nokia is emphasizing end-to-end solutions for 5G, targeting growth in radio access networks, backhaul (IP routing and optical infrastructure), as well as fixed wireless access for last mile connectivity. The company has a large installed base of 5G-ready hardware in the field, likely upgradable with software updates. Nokia also has 30 commercial 5G deals, including one with T-Mobile valued at $3.5 billion.

What about Nokia’s cost-cutting plan?

  • Nokia cut costs by EUR 1.2 billion as of December 2018 and expects further cuts of EUR 700 million ($786 million) by FY’20
  • EUR 500 million ($562 million) in savings will come from OpEx cuts, EUR 200 million ($224 million) from cost of sales
  • While Nokia expects a bulk of the savings to occur in FY’20, we will be looking for updates on its progress

Our interactive dashboard on what driving Nokia’s valuation details our expectations for the company and what’s driving its valuation.

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