Nokia saw its third-quarter network sales plunge 12 percent from a year ago to $5.81 billion (5.32 Euros), with revenue declining in all geographic regions. Nokia attributed the decline to slower growth in mobile operator sales as 4G networks have matured and 5G network deployments have not yet started.
Company executives said they expect network sales to decline at a similar rate in the fourth quarter and even into next year. “Challenging networking markets are nothing new,” said CEO Rajeev Suri during a call with investors.
Analysts questioned why the company wasn’t seeing more benefits from its $17 billion Alcatel-Lucent acquisition, completed earlier this year. Suri responded to that criticism by saying that the premise of the Alcatel-Lucent deal was to be able to offer an end-to-end service and also have a way into new markets. “We want to grow an independent software business, and we are dedicating sales force to that,” he said.
Suri noted that the company is starting to gain traction with webscale companies and is targeting at least 20 of those firms.
However, the company’s total revenues sharply increased to $6.42 billion from $3.31 billion reported in the same period last year. The increase was attributed to the Alcatel-Lucent purchase.
Nokia’s adjusted gross margin in the quarter was 39.7 percent compared with 37.7 percent a year ago. Operating margin decreased to 9.3 percent on a year-over-year basis.
At midday, Nokia shares were trading at $4.76, down 7.6 percent from yesterday’s close.
Nokia’s results were not surprising, as competitor Ericsson also has been struggling with slow growth in mobile operator networks. Ericsson ended the third quarter with a 233 million Swedish kroner ($26.2 million) loss, compared with a net profit of 3.08 billion Swedish kroner ($345 million) in the same period last year.
Last quarter, Suri said that he thought Nokia may have opportunities to take market share away from competitor Ericsson due to uncertainty in that company’s leadership. Ericsson did name Borje Ekholm as its new CEO yesterday. Suri did say the his company continues to believe there is a market share opportunity from the weakness in its competitors. However, he also added that there hasn’t been a significant change in pricing from the first quarter of 2015.
Nokia said it continues to make progress with its cost-cutting measures, and said that its target of saving $1.31 million by 2018 will help it manage the downturn.
Nokia also announced that CFO Timo Ihamuotila will be leaving at the end of the year to take a job with ABB. He will be replaced by Kristian Pullola, who is currently senior vice president, corporate controller.