Optical/IP Networks

Nokia Hits Higher Targets

Nokia Corp.'s (NYSE: NOK) network division provided a further boost to the infrastructure market today, reporting a fourth-quarter pro forma operating profit of €206 million (US$262 million) amid hopes of a possible industry upturn for 2004 (see Nokia Meets Q4 Estimates).

Pro forma operating margin reached 12.1 percent, against an earlier disappointing breakeven forecast (see Nokia's Mixed Blessings). The only blip came from an 18 percent year-on-year fall in net sales, to €1.7 billion ($2.2 billion).

The results are in keeping with the Finnish vendor’s recent assertion that its performance would be “significantly higher than estimated.” (See Nokia Stock Rockets.)

CEO Jorma Ollila put the improvement down to the impact of restructuring measures taken in early 2003, as well as “stronger-than-expected year-end operator investments.” (See More Finns Finished.)

Ollila claims that carriers have at last begun to ramp up investment in third-generation W-CDMA networks, an area in which he admits Nokia has previously suffered technical setbacks (see Nokia Suffers 3G Blow). “It reflects the improved profitability of 3G W-CDMA, as we have successfully addressed temporary quality issues experienced in the first part of 2003,” he told a press conference.

Looking ahead, the Nokia boss reiterated industry belief that the market may be heading for better days. “Forecasts for 2004 are that the sentiment has greatly improved and operators are much more open to look at investment. We expect it to be flat or somewhat up in the coming year… We feel really confident going forward… We see growth for the market. Operators are continuing with a good rollout pace.”

Such belief coincides with the results of rival vendor financials released today. German network player Siemens AG (NYSE: SI; Frankfurt: SIE) provided further signs of market stabilization in its first-quarter 2004 results, reporting an upbeat mobile network outlook (see Siemens Lifts Q1 Profit).

Nokia’s Ollila was also keen to play down speculation that the vendor could be about to mount an attack on the CDMA (Code Division Multiple Access) network market (see Nokia Mulls CDMA Move and Nokia's CDMA Shopping List). “On the W-CDMA side we have rolled out established networks, but with CDMA... we have not started a technology program.”

Overall, Nokia today posted fourth-quarter pro forma earnings per share of €0.29 ($0.37) on the back of €8.8 billion ($11.2 billion) in sales, a 1 percent fall year-on-year. Full-year results saw a 2 percent fall in net sales to €29.5 billion ($37.6 billion).

Nokia shares rose as a result of today’s figures, up 3.10 percent to €16.78 ($21.3) per share at press time.

— Justin Springham, Senior Editor, Europe, Unstrung

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