Nokia reported second quarter losses of $738.2 million compared to $386.45 million in the same quarter the previous year thanks to expenses related to its acquisition of Alcatel-Lucent and weakness in the wireless equipment market.
The company’s profit also dropped 45 percent to $216.1 million down from $395.36 million in the same quarter the previous year. Revenues, meanwhile were $6.24 billion, up from $3.25 billion in the same period in 2015.
The company’s stock dropped about 4 percent this morning on news of the increased losses.
Nokia CEO Rajeev Suri said that because of the weakness in the market, the company will be increasing its cost cutting and is now targeting $1.32 billion in cost savings by 2018 up from $1.02 billion.
The company laid off some employees in Finland in April as part of its cost cutting measures and hinted that further cuts would likely occur due to overlapping personnel from its acquisition of Alcatel Lucent. In today’s call with investors, Suri didn’t specifically address whether additional layoffs would occur but did say that there would be cuts to research and development.
Suri also said the mobile network business is challenging and noted that the company will not pursue opportunities with mobile operators that are not profitable. Specifically, he noted that this was the case with some Eastern European operators.
Interestingly, Suri also believes that Nokia may have opportunities to take market share away from competitor Ericsson due to uncertainty in that company’s leadership. Ericsson fired its President and CEO Hans Vestberg July 25 and is currently searching for a replacement.
Nokia does expect the weakness in the network business to subside somewhat in the third quarter and to pick up in the fourth quarter, and therefore it expects to decrease its losses in the second half of the year.
Suri noted that the 4G business is not going away and that operators are still looking to improve their LTE coverage while at the same time rolling out 5G-ready equipment. “The 5G radio will not be fully standardized for awhile, and it will complement 4G, not be a full replacement,” Suri noted.
He added that 5G is a full network evolution and includes operators migrating to software-defined networking (SDN) and a virtual core, which bodes well for Nokia. Research firm IHS/Markit recently named Nokia a top pick for software-defined networking (SDN) orchestration systems based upon its interviews with telecom operators.