Nokia takes confident stance with updated guidance

Nokia is set to publish its annual financial results for 2021 in early February, but it is already indicating that certain figures will be better than expected.

The Finnish vendor has updated its guidance for 2021 and is expecting a comparable operating margin of 12.4% to 12.6%. In October last year, Nokia CEO Pekka Lundmark was still guiding for a full-year operating margin of between 10% and 12%.

Nokia also now estimates net sales of about €22.2 billion (US$25.2 billion), which falls within its previous guidance of €21.7 billion ($24.6 billion) to €22.7 billion ($25.8 billion).

While Nokia's underlying business performed largely as anticipated in the fourth quarter of 2021, the vendor said other operating income was higher than expected, including further benefits from venture fund investments.

It also cited a one-off software contract in the second quarter, bad debt provision reversals, and some other one-time benefits.

The ongoing concern is that supply bottlenecks for components will affect growth this year. "We believe it is likely it will get worse before it gets better," Lundmark said in October. "We expect it will limit margin expansion potential next year. This is an overhanging shadow for 2022."

Looking ahead

Nokia has nevertheless provided a new comparable operating margin guidance of 11% to 13.5% for 2022. It said the new guidance "considers estimated continued improvements in the underlying business, supply constraints and cost inflation, with the year-on-year progression also impacted by the significant one-offs seen in 2021."

Nokia is currently in the middle of a turnaround strategy, which Lundmark announced when he replaced Rajeev Suri in 2020. Efforts have largely focused on a mobile networks business that accounts for about 43% of sales.

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More should be revealed on how this strategy is progressing when Nokia releases its fourth-quarter and full-year 2021 financial results on February 3. The vendor indicated that it will also revisit its longer-term outlook.

Certainly, analysts will be hoping to see further evidence of an improvement in Nokia's 5G business. The vendor has at least been able to report more 5G deals this year after long-standing partner Tele2 selected Nokia as its 5G radio network access (RAN) partner in Estonia, Latvia and Lithuania.

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— Anne Morris, contributing editor, special to Light Reading