Nokia has managed to secure huge profits following a patent deal with Apple and its increased market shares this quarter. It was expected that Nokia’s business might show a negative trend this year, however, the turn-up has exceeded analyst expectations.
The numbers are encouraging for the network equipment maker as its shares have increased 5.5 percent. Nokia has reported its second-quarter profits have increased by 73 percent from the previous year. The profits recorded are stated to be $674 million (574 million euros), while analysts had forecasted the amount at 447 million euros.
Rajiv Suri, Nokia’s Chief Executive said, “We are actually taking some share in the market … early signs look quite promising in terms of market share development”.
Despite having struggled in the recent years, Nokia has managed to win back the market shares thanks to its broad portfolio and acquisition of its rival Alcatel-Lucent for $15.6 billion in 2016. This has helped Nokia become less dependent on mobile broadband alone and has also launched router products for internet giants.
The Competitors
While Nokia is making profits, Ericsson – its Swedish rival – is on the decline despite having spent $1.7 billion in restructuring, provisions and write-downs.
China’s Huawei has also managed to bag a 15% rise in profits this quarter, however, it hasn’t given a breakdown for the network accessories profit alone.
Market Challenges
While talking about the challenges in the market, Suri said, “We now expect a decline in the market in the range of 3-5 percent, versus our earlier view of a low-single digit decline.”
Inderes analyst Mikael Rautanen said, “Weakening of the general market outlook is a clear minus. But Nokia’s profitability shows they are able to deliver good results in weak markets”.
Nokia depends on its network business, which accounts for 90% of its sales. The market trends for network business are set to decline and the same is true for Nokia. However, Nokia reiterated its full-year operating margin forecast of 8 percent to 10 percent for the business.
The patent deal with Apple helped Nokia gather overall sales of 5.63 billion euros, showing only 1 percent decline in total sales, while the quarterly sales declined by 5 percent from the previous year.
Talking about the potential market of 5G, Suri said,
“We think that 5G will likely last longer and be deeper than first thought. 5G trials will accelerate in 2018 and, in 2019, we can expect to see meaningful deployment in the U.S., China and potentially other markets like Japan.”
Nokia was taken aback by the revolutionary changes in the mobile phone industry a few years ago, however, the network accessories producer is on its way back to the top.
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