Light Reading

Nokia Holds Steady in Q2, Raises Outlook

Ray Le Maistre
7/24/2014
50%
50%

In a week of turmoil for the Finnish technology sector, the new-look Nokia, which began its new life in late April, has provided some stability with the publication Thursday morning of its second-quarter financials and outlook for the rest of the year. (See Nokia Ushers In New Era, Retires NSN Name.)

With much of the recent focus on the job cuts at the former mobile devices business, Nokia Corp. (NYSE: NOK)'s three remaining business units have not only delivered solid if unspectacular results, but have also given cause for conservative optimism as operating profits continue to creep up. (See Expect Further Cuts at Microsoft Devices – Analyst and Microsoft to Axe 12,500 Ex-Nokia Employees.)

Nokia reported second-quarter revenues of €2.94 billion (US$4 billion), down 7% from a year ago (mainly due to strategic exits from certain areas of business) and up 10% sequentially. Its gross margin (before the impact of one-time costs) was steady at 44%, while operating profits were up significantly compared with a year ago at €284 million ($383 million) and were much better than anticipated.

Table 1: Nokia Q2 2014 Key Financials

In Euros millions Q2 2014 Q2 2013 Change Q1 2014 Change
Revenues 2,942 3,155 -7% 2,664 10%
-- Of which Networks 2,566 2,781 -8% 2,328 10%
-- Of which HERE 232 233 0% 209 11%
-- Of which Technologies 147 145 1% 131 12%
Gross margin 44.0% 43.6% Increase of 0.4 of a percentage point 45.7% Decrease of 1.7 percentage points
Operating profit 284 12 Massive! 242 17%
Source: Nokia

Nokia Networks , which accounts for 87% of sales, reported revenues of €2.57 billion ($3.5 billion), down 8% from a year ago. That decline is largely due to the company's decision to exit unprofitable professional services deals: Global Services revenues decreased by 19% to €1.19 billion ($1.6 billion) compared with the second quarter of 2013, while Mobile Broadband infrastructure revenues were up 6% from a year ago at €1.36 billion ($1.83 billion).

The company added that excluding currency exchange fluctuations and the divestment/exit of various accounts and business lines, like-for-like Networks revenues would have been up by 1% from a year ago.

The vendor said the year-on-year increase in mobile broadband revenues was attributable to "strong net sales growth in both LTE and core networks," partially offset by lower sales of 2G and 3G radio access equipment. Nokia also noted that revenues were "adversely affected by shortages of certain components," but that the impact was not as bad as in the first quarter.

On a geographic basis, Networks revenues were down in most regions compared with a year ago, with Asia-Pacific and China in particular the exceptions: Second-quarter revenues in China increased by 18% year-on-year to €306 million ($412 million) due to the roll-out of LTE TDD networks.

The vendor says it "further strengthened its position as the top non-Chinese vendor" for 4G network rollouts in China by becoming "the only non-Chinese vendor to win a double-digit unit share in the second phase" of China Mobile's LTE TDD tender. (See Nokia Networks Boasts China Mobile 4G Deals.)


Want to know more about 4G LTE? Check out our dedicated 4G LTE content channel here on Light Reading.


Now Nokia expects its infrastructure business to pick up momentum. The company said it expects Networks revenues to be better during the second half of 2014 compared with the same period a year earlier, and believes its operating profits will exceed previous expectations. There are a number of factors expected to affect Nokia's second-half revenues, including "a higher proportion of major new network deployment projects."

And as if to hammer home that point, the company also announced Thursday morning a three-year 4G infrastructure and professional services deal with Telefónica SA (NYSE: TEF), which will see Nokia Networks act as the "key supplier" in the regions of Andalusia, Galicia, Castilla Leon and Levante.

Investors liked that positive outlook, as Nokia's share price jumped by 7.5% to €6.15 in morning trading on the Helsinki exchange.

Revenues at Nokia's other two businesses, HERE (mapping and location applications) and Technologies (intellectual property licensing) were in line with a year ago.

Two of Nokia's key rivals, Ericsson and Huawei, have also unveiled financial details during the past week. (See Ericsson Leaps on Q2 Margin Boost , Ericsson's Network Boss Outlines Top Priorities, Huawei Boosts H1 Revenues by 18% and Huawei Unveils H1 Revenues.)

— Ray Le Maistre, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, Editor-in-Chief, Light Reading

(21)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Page 1 / 3   >   >>
Kruz
50%
50%
Kruz,
User Rank: Light Sabre
8/20/2014 | 9:08:55 AM
Re: Unspectacular, but....
What is certain is that Nokia employees do.
pcharles09
50%
50%
pcharles09,
User Rank: Light Beer
8/19/2014 | 5:25:39 PM
Re: Unspectacular, but....
@Kruz,

I wonder if Nadella rues the day MSFT acquired the Nokia units.
Kruz
50%
50%
Kruz,
User Rank: Light Sabre
8/2/2014 | 1:57:30 AM
Re: Unspectacular, but....
I do blame both, Nokia for failing to go with the Android trend and MSFT for hijacking Nokia, in a way, leaving the company with few choices.
pcharles09
50%
50%
pcharles09,
User Rank: Light Beer
7/31/2014 | 7:24:24 PM
Re: Unspectacular, but....
@Kruz,

MSFT was slow to adapt too as well as get into the mobile game. I guess the two were made for wach other.
Kruz
50%
50%
Kruz,
User Rank: Light Sabre
7/31/2014 | 9:53:42 AM
Re: Unspectacular, but....
Nokia thought it was a flagship device, consumers didnt follow. Nokia/MSFT has yet to understand the changing needs of the market. 920 is bulky and you could feel it in the pocket, for example. Nokia was too slow to adapt for example.
pcharles09
50%
50%
pcharles09,
User Rank: Light Beer
7/31/2014 | 9:33:54 AM
Re: Unspectacular, but....
@Kruz,

Alot of people thought that 'flagship' device was going to be the Lumia 920. I don't think that turned out to be the case so they're back to the drawing board... again.
Ariella
50%
50%
Ariella,
User Rank: Light Sabre
7/30/2014 | 2:27:22 PM
Re: Unspectacular, but....
@Liz makes sense. One type phone does not fit all. 
Liz Greenberg
50%
50%
Liz Greenberg,
User Rank: Light Sabre
7/30/2014 | 1:20:15 PM
Re: Unspectacular, but....
@Ariella, as I said to Kruz this really needs to be a focus for MSFT.  The perception that their products are either behind, too difficult, unstable or whatever has to be overcome.

Case in point, I took a friend to get her first smartphone.  Her son was convinced that she should get an Android device.  Luckily I had taken her shopping a week before and told her, "Try every device and see what one clicks with your brain.  One of them will be superior to you."  She soundly rejected Apple it was too hard for her eyes and her fingers (she is 62 and Taiwanese).  She then tried all the Android products, easier for her eyes and fingers but it didn't make sense to her.  So then she tried the various Nokia devices and ended up loving the 1520, it worked for her eyes, her fingers and her brain. 

Her son thought she was nuts and would never learn something "so difficult to use".  Fast forward, she loves it, enjoys learning all the things that it can do, texts with her kids and family, uses the mapping etc. 

A long post but the point is that MSFT needs to find a way to appeal to people by making the obvious obvious (not a typo).  Every OS exists for a reason and has capabilities that the others do not.  It is up to the manufacturers to make them known.
Liz Greenberg
50%
50%
Liz Greenberg,
User Rank: Light Sabre
7/30/2014 | 1:13:03 PM
Re: Unspectacular, but....
You are absolutely right @Kruz...MSFT has everything to lose if they can't convince the average user that their products are equal to or better than their competition.  Unfortunately, I don't think that they have hired anybody who can figure out how to make their products "cool" to the younger set that has been weaned from birth on Apple or Android products.
Ariella
50%
50%
Ariella,
User Rank: Light Sabre
7/30/2014 | 12:59:09 PM
Re: Unspectacular, but....
@Liz you touched on the sad reality that you can have a superior product but still not sell it well just because of the marketing. 
Page 1 / 3   >   >>
Flash Poll
From The Founder
Anshul Sadana answers questions from Steve Saunders, Light Reading's founder and CEO, about Arista's CloudVision, a global cloud network controller for workload orchestration and workflow automation delivering a turnkey solution for cloud networking.
Live Streaming Video
CLOUD / MANAGED SERVICES: Prepping Ethernet for the Cloud
Moderator: Ray LeMaistre Panelists: Jeremy Bye, Leonard Sheahan
LRTV Custom TV
End-User or Enterprise Benefits to the New IP

7|30|15   |   04:27   |   (1) comment


Andrew Coward discusses what the New IP means to end users or enterprise customers. He explains compelling reasons, including how every customer can get their own network, from the transformation to the New IP.
LRTV Custom TV
Network Visibility & the New IP

7|30|15   |   02:23   |   (0) comments


Mukund Srigopal provides an explanation of what network visibility is and how it is essential as service providers transition to the New IP. In addition, the importance of the network packet broker is discussed.
Between the CEOs
Video Exclusive With Basil Alwan, Alcatel-Lucent

7|24|15   |   26:44   |   (5) comments


Basil Alwan, President of IP Routing & Transport at Alcatel-Lucent, discusses virtualization, cultural challenges, the capex crunch and more with Light Reading founder and CEO Steve Saunders.
LRTV Custom TV
VDF: Enable the Financial With Mobile Money

7|20|15   |   06:53   |   (0) comments


Ian Ravenscroft discusses how operators can expand to occupy the entire digital services value chain through service innovation.
LRTV Custom TV
Telefónica on OSS Transformation

7|20|15   |   06:01   |   (0) comments


Jose Gonzales discusses the details of Telefónica's operation transformation program.
LRTV Custom TV
Judi Achmadi on Huawei's Cloud Storage Solution

7|20|15   |   03:33   |   (0) comments


Judi discusses the key business goals of TelekomSigma's public cloud service and how Huawei's solution helps them address challenges.
LRTV Custom TV
KPN Enlightening Digital Business & IT Transformation

7|20|15   |   06:19   |   (0) comments


Rob de Beer discusses the changes that operators need to make with service innovation now coming from the Internet world.
LRTV Custom TV
Stratus Telco-Grade Cloud Solutions & NFV

7|20|15   |   07:34   |   (0) comments


Ali Kafel from Stratus Technologies addresses high-availability concerns within the telco industry with a solution that enables telcos to provide high-availability and stateful fault-tolerance using a software-based approach.
LRTV Documentaries
The Six Million Dollar Business Man

7|20|15   |   01:52   |   (0) comments


Steve Saunders, publisher. A man barely alive after an acquisition malfunction imploded the company he founded. Gentlemen, we can rebuild Light Reading. Better, faster, stronger.
Between the CEOs
CEO Chat With Anukool Lakhina, Guavus

7|20|15   |   38:51   |   (1) comment


Guavus CEO Anukool Lakhina talks to Light Reading founder and CEO Steve Saunders about the role of operational analytics in the communications services and networking sectors, particularly in relation to IoT.
LRTV Custom TV
IBM's Flash Storage With Intel QuickAssist

7|20|15   |   03:18   |   (0) comments


Intel's Bev Crair and IBM's Eric Herzog discuss how IBM's V9000 Flash Storage System has helped customers around the world. Featuring real-time compression powered by Intel QuickAssist Technology, the V9000 is a next-gen flash storage solution.
LRTV Huawei Video Resource Center
Thailand's AIS: Transforming to an FMC Operator

7|17|15   |   4:53   |   (0) comments


Saran Phaloprakarn, Senior VP of Fixed Broadband Business Management of Thailand's AIS, was a keynote speaker at the first Asia-Pacific Ultra Broadband Summit in Bangkok. In this video, he talks to Heavy Reading about transforming into an FMC (FBB+MBB+Content) operator.
Upcoming Live Events
September 16-17, 2015, The Westin Galleria Dallas, Dallas, TX
September 16, 2015, The Westin Galleria Dallas, Dallas, TX
September 16, 2015, The Westin Galleria Dallas, Dallas, TX
September 29-30, 2015, The Westin Grand Müchen, Munich, Germany
October 14-15, 2015, New Orleans Ernest N. Morial Convention Center, New Orleans, LA
November 5, 2015, Hilton Santa Clara, Santa Clara, CA
November 17, 2015, Santa Clara, California
December 1, 2015, The Westin Times Square, New York City
All Upcoming Live Events
Infographics
Network operators start seeing savings from NFV in the first year, according to a study by Affirmed Networks and ACG.
Hot Topics
Robbins Succeeds Chambers as Cisco Changes CEOs
Mitch Wagner, West Coast Bureau Chief, Light Reading, 7/27/2015
Cable Feuds With Senate Dems Over STBs
Alan Breznick, Cable/Video Practice Leader, 7/31/2015
RJio to Launch Its Own 4G Devices Brand
Gagandeep Kaur, Contributing Editor, 7/27/2015
Easing the Tech Pains for the Homeless
Carol Wilson, Editor-at-large, 7/28/2015
Like Us on Facebook
Twitter Feed
September 22, 2015
Media Begins With “Me”
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
Basil Alwan, President of IP Routing & Transport at Alcatel-Lucent, discusses virtualization, cultural challenges, the capex crunch and more with Light Reading founder and CEO Steve Saunders.
Guavus CEO Anukool Lakhina talks to Light Reading founder and CEO Steve Saunders about the role of operational analytics in the communications services and networking sectors, particularly in relation to IoT.
Cats with Phones
Comes With Free Phone Stand Click Here
Who says cats don't have any skills?