Nokia’s (NOKIA.HE) second-quarter profit fell more sharply than expected as telecom operators around the world spent less on faster mobile networks, prompting the company to lift its cost-cutting target following its merger with Alcatel-Lucent.
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At the same time, Nokia is facing stiff competition from Chinese companies Huawei Technologies Co. and ZTE Corp., two players who have gained significant market shares in a few years’ time by offering innovative products at competitive prices.
In a conference call with reporters, Suri said the cost cuts would come in a “combination of all kinds of cost savings”, not revealing if more job cuts were to follow.
Shares in both Nokia and Ericsson have fallen by more than 26 percent this year. “As our successful integration work continues and as we get increased granular visibility into the business, our confidence in our ability to deliver cost savings also increases”, he said.
Nokia said the second-quarter figures weren’t prepared according to global accounting standards, known as IFRS, in excluding costs related to the Alcatel acquisition in addition to a range of other items that weren’t necessarily indicative of Nokia’s underlying performance.
The Espoo, Finland-based company attributed the decline to weakness in the mobile networks business, adding that that accounted for about 80% of the decline in the company’s networks business.
Group sales dropped 11 percent from a year ago to 5.67 billion euros, including network equipment sales falling to 5.23 billion, which compared with a market consensus of 5.42 billion.
Revenue fell short of the average analyst estimate of €5.87bn, while net profit was in line with expectations.
“It has emerged as a bit of a surprise how hard this market is and therefore the result is clearly below expectations”, Rautanen said in his video comment.
Nokia blamed the weak margin on Brazil operator Oi’s filing for bankruptcy protection in June and said excluding that, the margin would have been almost 7 per cent.
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After selling its handset business to Microsoft in 2014, it launched in 2015 the acquisition of Alcatel-Lucent, a company that had only recorded one year of annual profit since its inception in 2006.
