Daily Management Review

Nokia Network Expected to Boost Company Results in Q2


07/29/2015




Nokia Network Expected to Boost Company Results in Q2
The second quarter results of Nokia, which are to be announced on July 30, is expected to some increase in the overall operational sales on a year-over-year (y-o-y) basis. This, analysts concluded, was due to the strong Networks sales.
 
The network sales contributed 90 percent of its total revenues.
 
A number of contract wins in the U.S, Europe, India and China helped the company build a strong pipeline of orders. Service providers such as T-Mobile, Sprint, China Mobile, China Telecom, Vodafone, Bharti Airtel and Mobily had increased their spending.

The company’s network sales increased by 15% y-o-y on a constant currency basis to EUR 2.67 billion ($3 billion). This was driven by solid growth in the global services and a moderate increase in mobile broadband sales.
 
The lower-margin LTE deals in China however can put under pressure the lower margin of the company. The core Network business of the company managed to make only weak profits in the last quarter and missed out on the profitability forecast of the division of the company and consequently had to lower its full-year profit forecast for the division.

The operating profits from the Network of the company declined 61% y-o-y in Q1 this year resulting in the company-wide adjusted operating margin that shrunk 550 basis points to 8.3%. 
 
Going forward, Nokia expects that it’s Networks operating margin would be close to the mid-point of its long range predictions of  8-11%. The company expects that the Netowkr would also clock the same percentage in the second quarter.
 
The company’s division HERE and the Intellectual Property licensing division Nokia Technologies are also expected to exhibit strong top-line gains which would be in line with their recent performances.
HERE recorded a gain of 17% on the y-o-y basis in the last quarter and clocked 261 million Euros ($294 million).

Nokia Technologies showed a dramatic jump with revenues increasing a stupendous 96% increase y-o-y basis to touch 266 million Euros or $300 million. This was result of higher income from certain licensees that included Microsoft and a few one-time adjustments to accrued net sales from the existing agreements.
 
The half of the total value of the estimates is contributed by the sale of the handset business made Networks, formerly known as NSN.  The new CEO of the company Rajeev Suri is credited with turning the division around to sustained profitability on the back of a big restructuring program that cut its operating expenses by EUR 1.35 billion and increased its focus on mobile broadband.
 
The Nokia’s top line however suffered with a decline of  17% on a y-o-y basis in the first quarter of 2014 after the company exited unprofitable service contracts.
 
The revenue generation for the company is expected to be bolstered by rising 4G LTE deployment activity. Despite the slowdown of the European business in the second quarter, the profitable contracts with China Mobile and China Telecom have helped boost revenues predictions. The company hopes to do well in wake of strong as carrier spending owing to the pipeline deals.
 
(source: www.forbes.com)
 






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