Nokia’s senior management spun an optimistic tune while discussing the company’s 2018 results, noting that the Finnish vendor ended the year with a mixed fourth quarter and expects 2019 to be positive overall following a rocky start to the new year.
Rajeev Suri, President and CEO of Nokia, said the fourth quarter was “not perfect, but there were several positive developments.”
For example, Q4 was the second consecutive quarter of year-over-year sales growth across all five of the company’s network business groups. It also saw improved profitability in both Networks and Nokia Technologies. And, group net sales increased 3 percent year over year to $7.9 billion in Q4, while annual sales improved by 1 percent to $25.8 billion. However, full-year operating income plunged from a gain of $18.3 million in 2017, to a loss of $67.6 million in 2018.
“Looking forward, I expect Nokia’s performance to strengthen for the full year 2019 versus 2018, and our view of a fast and meaningful shift to 5G remains unchanged,” Suri noted. “Given that 5G rollouts will be staggered over the course of the year, we expect 2019 to have a soft first half followed by a much more robust second half.”
Suri did add that the first quarter of 2019 would be “particularly weak.”
Nokia’s results came hot on the heels of rival Ericsson’s release of Q4 and full-year 2018 results. Those results had some similarities, such as a strong performance in North America as U.S. operators launch 5G services and expectations of accelerated growth in 2019 and 2020 because of 5G.
“2019 will be better than 2018, and 2020 will be better than 2019,” Suri told financial analysts during Nokia’s conference call. He referred throughout the call to the “virtuous cycle of investment” that he expects to accompany 5G deployments. He explained that this will have a positive impact for all of Nokia’s businesses, from optical to macro radio, fixed wireless access to cloud core, small cells to IP routing, network agnostic software and more.
“Following this we expect a second wave where industrial customers will invest in private wireless technology including LTE and 5G-ready networks. With our end-to-end portfolio, Nokia is well-positioned to tap this extended cycle,” Suri said.
Nokia also believes it gained market share in networks in 2018, noting that the overall market declined by between 1 percent to 2 percent while Nokia gained by 2 percent. Suri cited small cells and optical networking as two areas where the vendor had gained meaningful shares. Net sales in the Networks segment increased by 2 percent year over year, although the rate of growth improved to 6 percent in Q4.
In Q4, Nokia completed restructuring activities related to a long-term cost savings program. Those efforts were targeted at saving $1.4 billion in costs per year. It now expects to save a further $802 million over the next two years compared to 2018.
Nokia today also appointed Tommi Uttio and Sandra Motley to its Group Leadership Team. Uttio was named head of the company’s Mobile Networks group last November. Motley was named head of its Fixed Networks Business Group earlier this month.
Both of those divisions now operate under Nokia’s newly formed Access Networks organization. That structure was developed in an effort to better align its operations to win 5G contracts against rivals such as Ericsson, Huawei, ZTE, and Samsung.