Nokia President and CEO Rajeev Suri today said the company has created a new standalone software business unit.
“During the next two years, we aim to tap growth in software with a broader ambition to build a significant standalone software business,” Suri said in a prepared statement today as part of Nokia’s Capital Markets Day event in Barcelona, Spain.
“Simultaneously, we will remain focused on flawlessly executing our €1.2 billion ($1.3 billion) cost saving program,” he added.
Software Separate from Hardware
The Finnish company says its new focus on software will move beyond its “current product-attached software model and create a software business with the margin profile of large software companies, focused on areas including enterprise software and IoT platforms.”
Aside from that prepared statement, details of the new software business are thin this morning. But the fact that Nokia wants software to be unattached to its existing products sounds like the disaggregation theme that many traditional hardware vendors have begun to embrace, including Cisco and Juniper.
In addition, Nokia plans to beef up its sales efforts, targeting select vertical markets that require high-performing, secure networks. Those verticals include: energy, transportation, the public sector, technological extra-large enterprises, and webscale companies.
Suri refers to Nokia’s traditional customers, communication service providers, as its primary market, and he lumps the company’s other opportunities into what he refers to as adjacent markets.
Nokia’s primary addressable market size is about €113 billion ($121 billion) in 2016, and is expected to have a 5-year compound annual growth rate of approximately 1 percent. While Nokia’s adjacent addressable market size is about EUR 18 billion ($19 billion) in 2016, and is expected to have a 5-year compound annual growth rate of approximately 13 percent.
Nokia Compares Itself to Ericsson
Nokia’s efforts to move the company toward more growth opportunities comes subsequent to its acquisition of Alcatel-Lucent in January. Since the merger, the company has reported lackluster earnings. And it’s blamed a lot of its problems on the decline in demand from mobile network operators.
Nokia said today even though its numbers are disappointing, it’s still outperforming its arch-rival Ericsson, reports Reuters. Apparently, investors aren’t consoled. The company’s stock is down about 4 percent.