Nokia presented a set of results that contrasted sharply with Ericsson’s more robust performance in the first quarter of 2019, although the Finnish vendor reiterated that a weak Q1 was expected and it has not changed its outlook for the full year.

The market, however, was clearly shocked by the fact that Nokia posted a loss. The vendor reported a non-IFRS adjusted operating loss of $66 million, which compared to analysts’ profit expectations ranging from $194 million to $510 million profit in a Reuters poll and an average profit estimate of about $314 million in a Bloomberg survey. Net sales were up 2% year over year to about $5.56 billion.

Although Nokia has maintained its previous forecast for earnings per share of between 27 and 32 cents this year, it will certainly have to work harder to reach its goals, including a 2019 operating margin goal of 9%-12%.

The vendor’s first-quarter woes have been linked to a failure to supply 5G network equipment on time, and the pressure to invest as a consequence of the international dispute over the use of equipment from rival Huawei.

In the words of CEO Rajeev Suri, “competitive intensity has slightly increased in certain accounts as some competitors seek to be more commercially aggressive in the early stages of 5G and as some customers reassess their vendors in light of security concerns, creating near-term pressure but longer-term opportunity.”

Speaking during the presentation of the first quarter 2019 results on Thursday, Suri added that competitive intensity “is a risk that we see, potentially” in the year ahead. He also noted that Nokia has come up with a solution that means any potential change in a vendor does not require a full-scale network swap. For instance, initial offerings of 5G based on the 5G New Radio (NR) Non-Standalone (5G NR NSA) will be tightly coupled to LTE networks, but Nokia said its solution is to provide an LTE overlay that can be deployed alongside 5G NR NSA and requires minimal support from an incumbent vendor.

Mikael Rautanen, an analyst at equity research firm Inderes, told Reuters that Huawei’s “unclear situation” has turned negative for Nokia in the short term, but should be more of an opportunity in the longer term.

The vendor also alluded to the fact that it has fallen behind rivals on 5G network readiness, noting that “due to the evolving readiness of the 5G ecosystem” it was “unable to recognize” about $222 million of net sales related to 5G deliveries mainly in North America, “which we expect to recognize in full before the end of 2019.”

“It looks like Nokia has not upgraded its product offering fully to 5G yet. They explain it with external reasons like standards, but there have to be also internal factors,” Rautanen added.

Suri said 5G revenues are expected to grow sharply, particularly in the second half of the year, driven by Nokia’s 36 commercial contract wins to date. He stressed the need to adopt a “nuanced” regional strategy with 5G, indicating that the vendor intends to take a prudent approach to investments in China and avoid competing for high-volume but low-value business as 5G networks are rolled out in the market. While Nokia aims to participate in 5G trials in China in 2019, its focus is on the commercial phase in 2020.

“The momentum is with us,” Suri said, pointing to the strong performance of many of its businesses including IP routing and optical networks, the good underlying momentum in software and enterprise, and ongoing measures to build a strong licensing business for the long term. “We do see risks, but more importantly we see a path to delivering on our 2019 guidance.”