Nokia Readies for Huge Loss

The networks division of Nokia Corp. (NYSE: NOK), the world’s second largest infrastructure vendor, could be heading for a massive €250 million (US$269 million) loss this year.

Richard Windsor, an analyst at Nomura Holdings Inc., states that the continuing downturn in the wireless network infrastructure market will take a heavy toll on the Finnish giant in 2003.

“We expect losses of €215 million [$231 million] in the first half [of 2003] and €36 million [$39 million] in the second half, giving losses of €251 million [$270 million] for the full year,” writes Windsor in an email.

Such a slump is likely to absorb all the growth created by its mobile phones division. “We expect that a €250 million overhaul of networks will be announced aiming at a networks break-even in 2004,” he continues. “10 percent growth is likely to be downgraded to 0 percent growth for 2003. We expect the medium-term target of 10 percent growth to remain intact.”

Nokia Networks has already announced plans to stem the loss, starting with the axing of 1,800 staff from global offices -- more than 10 percent of its workforce (see More Finns Finished). This reduction followed last month’s warning that its network division will be reporting first-quarter sales as much as 20 percent lower than originally predicted, leading to a substantial pro forma operating loss (see Network Warning From Nokia).

Despite the huge loss, Windsor still rates Nokia stock as a Buy. “Nokia remains by far the most financially sound company in the sector. Nokia’s profitability would have to collapse significantly before the company stopped generating cash.”

Unstrung will provide full coverage of Nokia’s first-quarter earnings announcement on Thursday, April 17.

— Justin Springham, Senior Editor, Europe, Unstrung

lrmobile_castro 12/5/2012 | 12:13:34 AM
re: Nokia Readies for Huge Loss the glory days of infrastructure vendors are over. I doubt we'll ever see funding to put up infrastructure as it was in the past. Wireless = ultility unless you vastly reduce infrastructure requirements. On that note i wonder if smart antennas and MESH will ever deliver but back to the story.

This scenario is not good for the infrastructure vendors. Time to do an IBM? Perhaps the new model for nokia systems, ericsson, and Alcatel should be running and maintaining networks rather than just selling them. Regardless, my guess is that more layoffs will come. W-CDMA is dead in the water.

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