Nokia + AlcaLu 2015: A Financial Retrospective

Here's an interesting snapshot of 2015 for Nokia-watchers.

The Finnish giant completed its acquisition of Alcatel-Lucent earlier this year, creating a clear number three player in the communications networking technology and professional services sector, behind Huawei and Ericsson. (See Huawei: New King of the CSP Market, Finn de Siècle for Alcatel-Lucent and Nokia Confirms Leadership Team.)

But how would a combined Nokia and ALcaLu performed in 2015 had they been one and the same company? Well, here's a guide, as Nokia has published a retrospective look at its 2015 financials, including the Alcatel-Lucent business, to give the financial world a comparison for this year's earnings reports.

Table 1: Nokia + Alcatel-Lucent Financials for 2015 by Business Line

Q1-Q4'15 EUR millions non-IFRS	Ultra Broadband Networks (1)	IP Networks & Apps. (2)	Networks Business Total (3)	Nokia Tech.	Group Common and Other	Elim*	Nokia Total
Net sales	18 079	6 555	24 634	1 074	921	-24	26 606
Cost of sales	(11 669)	(3 696)	(15 365)	-10	-813	24	(16 164)
Gross profit	6 410	2 859	9 269	1 064	108	0	10 441
% of net sales	35.50%	43.60%	37.60%	99.00%	11.80%		39.20%
Research and development expenses	(2 655)	(1 258)	(3 914)	-270	-284	0	(4 468)
% of net sales	15%	19%	16%	25%	31%		17%
Selling, general and administrative expenses	(2 078)	-770	(2 848)	-109	-219	0	(3 175)
% of net sales	11%	12%	12%	10%	24%		12%
Other income and expenses	-20	9	-11	7	93	0	89
Operating profit	1 656	840	2 496	692	-301	0	2 887
% of net sales	9.20%	12.80%	10.10%	64.40%	-32.70%		10.80%
1. Mobile Networks net sales of EUR 15,694 million, Fixed Networks net sales of EUR 2,385 million. 2. IP Networks net sales of EUR 3,211 million, Optical Networks net sales of EUR 1,584 million, Applications & Analytics net sales of EUR 1,760 million. 3. Services net sales of EUR 9,026 million. * Eliminations

The margin numbers are particularly interesting to compare between 'Ultra Broadband' (mobile and fixed line access) and 'IP Networks and Applications' (IP, optical, applications and analytics): It'll be interesting to see if the access business margins increase once Nokia has implemented its cost-cutting plan, as the mobile access business is expected to bear the brunt of the cost-cutting and ultimately become more efficient. (See Nokia to Slash Jobs Following AlcaLu Merger.)

It'll also be interesting to see if Nokia can prove MKM Partners analyst Michael Genovese wrong by beating his Nokia revenues estimates for 2016. (See Eurobites: Nokia Sales to Hit $26.5B in 2016 – Analyst.)

— Ray Le Maistre, , Editor-in-Chief, Light Reading