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Nokia cuts full-year profit forecast, approves new strategy

Nokia cuts full-year profit forecast, approves new strategy

Nokia revised its business strategy while cutting the company’s full-year profit forecast on Thursday, according to Metro US.

Amid the coronacrisis, Nokia has lowered its full-year profit outlook range by 0.02 euros to a midpoint of 0.23 euros per share. The Finnish company cut its 2020 operating margin forecast to 9% from 9.5% and for 2021 expects operating margin of 7-10%.

Under new CEO Pekka Lundmark, the telecom network equipment maker’s quarterly underlying profit met expectations in its first earnings.

The world-famous tech company has announced a new strategy from January. According to it, Nokia will have four business groups:

  • mobile networks,
  • IP and fixed networks,
  • cloud and network services, and
  • Nokia technologies.

Nokia CEO underlined in the statement that the company expects to underperform its primary addressable market, excluding China, in 2020 in its networks and software businesses. In fact, the Finnish company had earlier expected to slightly underperform, Lundmark stressed.

“We expect to stabilise our financial performance in 2021 and deliver progressive improvement towards our long-term goal after that,” Nokia CEO said in a statement.

5G as the next challenge for Nokia

Despite the coronacrisis, Nokia is working on 5G network’s rolling out. Parallelly with its regional rival Ericsson, Nokia has been gaining more customers as more telecom operators start rolling out 5G networks.

In Q3, however, Nokia suffered a setback when it lost out to Samsung Electronics on a part of a contract to supply 5G equipment to Verizon. Now, Nokia needs to further increase R&D investments to ensure leadership in 5G field.

Last week, Ericsson reported quarterly core earnings above market estimates, helped by higher margins and China’s 5G rollout, and said it was “more confident” in meeting its 2020 targets.

Unlike Ericsson, Nokia has not won any radio contracts in the highly competitive Chinese markets. Finnish company’s quarterly revenue also fell due to weakness in its services business.