A sustained period of decline in Nokia’s Mobile Networks business indicates a major loss of business with Verizon in 2020 could be a lasting drag on the Finnish vendor. CEO Pekka Lundmark’s three-year turnaround plan, which commenced in late 2020, has yet to reverse a downward trend that began around the dawn of 5G.

The company returned to profitability in early 2021 and closed the year in the black, partly on the back of significant job cuts. However, early missteps on 5G radio access network (RAN) silicon and compounding impacts of Verizon’s shift to Samsung resulted in a 13% year-over-year revenue slide in Mobile Networks during the fourth quarter of 2021. 

The unit, which includes RAN, microwave radio link products, and network planning, deployment, and support services, accounted for 43% of Nokia’s entire business during Q4. Mobile Networks ended the final quarter of 2021 with $3.15 billion in revenue. 

Samsung, which earned Nokia’s spot in Verizon’s 5G RAN buildout, recently inked a $6.64 billion deal with the operator that runs through 2025. Despite the 7% year-over-year decline in revenue from 2020 to 2021, which Lundmark said was “pretty much as we expected,” he noted that gross margins and comparable operating margins are up in the unit.

Nokia’s overall conversion rate from 4G LTE deals with network operators to 5G “has now stabilized on about a 90% level,” he said during the earnings call, according to a transcript. “Now, of course, the only acceptable goal going forward is to then start gaining market share, and I think we have every possibility to do that,” he added.

Lundmark’s optimistic outlook continues to encounter challenges elsewhere, particularly in enterprise, a segment almost universally coveted and deemed a critical growth engine for network infrastructure vendors, software providers, and carriers. 

Nokia’s enterprise business, which isn’t reported as a standalone unit but tracked separately internally, “did not meet our expectations,” Lundmark said. “We have a very strong ambition to grow beyond our traditional customer base of service providers, and we do believe that enterprise business offers significant growth opportunities going forward.”

Nonetheless, Nokia’s net sales with enterprises grew 1% in 2021. “That’s the bad news,” Lundmark said. “But the good news is that we had extremely strong order intake, especially in the second half of the year.”

Private wireless networks, an important focus area for Nokia and its competitors in the enterprise segment, jumped from 260 customers at the end of 2020 to 420 customers at 2021’s close, reflecting a 61.5% year-over-year increase. 

Nokia’s Network Infrastructure unit remains its most obvious bright spot for growth, accounting for 35% of its total business and ending Q4 with $2.57 billion in revenue, marking a 14% year-over-year increase. 

The gap between Nokia’s primary business units also narrowed throughout 2021 with Network Infrastructure jumping from 30% to 35% of total revenue during the 12-month period and Mobile Networks declining from 48.5% to 43% during the same period. That’s a 10.5% shift in revenue contribution performance in one year.

The vendor's Cloud and Network Services unit was flat year over year, ending Q4 2021 with $1.1 billion in revenue. The company banked almost $777 million in profit on $7.32 billion in revenue during the quarter. 

The $886 million revenue decline in Nokia’s Mobile Networks business from 2020 to 2021 accounts for all of the profit it generated during the final quarter of the year and then some.