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Finnish telecommunications equipment manufacturer Nokia The company reported a smaller-than-expected rise in quarterly profits on Thursday, as sluggish demand for 5G equipment in key markets of North America and India continued to weigh on sales.
“This will continue to be a weak year for the mobile radio access network market, and we expect, as I said, it will gradually rebound during the year,” CEO Pekka Lundmark told reporters.
Decreased demand for 5G equipment in North America, Nokia's largest market and Swedish competitor EricssonMarket share losses in China forced it to lower expectations and lay off thousands of employees to cut costs.
First-quarter operating profit, excluding certain income and expense items, supported by cost reductions, was €597 million, up from €479 million a year earlier, with constant currency sales down 19%.
Four analysts surveyed by LSEG had on average expected earnings of 663 million euros.
Nokia shares reversed course and rose 1.5% by 0801 GMT, after falling 3% earlier.
In a note to clients, JP Morgan analysts said Nokia's weak sales trends caused the earnings miss, but added that the company was well positioned to recover.
CEO Lundmark said the improvement in orders seen late last year continued in the first quarter despite ongoing challenges in the market.
The mobile network segment, which books orders for 5G equipment, saw local currency sales fall 37% in the quarter, which Nokia said marked a low point this year and it expects a recovery in the remainder of 2024.
Nokia in January already expected a recovery in demand in the second half of 2024. Ericsson said on Tuesday that its sales would return to normal in the second half.
Sales in the Network Infrastructure division decreased by 26%, both in local currency and net terms.
“Overall, the weakness in the first part of the year will put more pressure on the rest of the year, and the sustainability of Nokia's guidance looks set to come under pressure again until the end of the year,” Enderis analyst Atti said. Ricola.
PP Foresight's Paolo Pescatore said Nokia and Ericsson's confidence in the market in the medium and long term is encouraging, but said macroeconomic uncertainty, elections and ongoing geopolitical tensions remain a major concern.
Nokia on Thursday reiterated the forecast it made in January for similar operating profits in 2024 of between 2.3 and 2.9 billion euros.
Comparable gross margin widened to 48.6% from 37.7%.
