STOCKHOLM--Revenue of Nokia Corp.'s network arm continued to
slip in the first quarter, underscoring the challenges facing the
company's new chief executive to get the business growing.
In its earnings release on Tuesday Nokia said revenue fell 15%
to 2.66 billion euros on the year in the three months ending March
31. The sales decline was largely a result of a 17% sales drop for
Nokia's mobile network operations, which accounts for almost 90% of
the company's revenue, now that the handset business has been
transferred to Microsoft Corp.
Nokia earlier on Tuesday named mobile-network veteran Rajeev
Suri its new chief executive and said it would use a significant
amount of the cash from the recent sale of its handset business to
distribute more than 3 billion euros to investors.
Some of the network business' revenue decline could be
attributed to restructuring efforts, as the mobile network unit has
divested parts of its business, such as optical networks, to focus
solely on mobile-broadband equipment. Lower sales of services also
contributed to the decline, Nokia said.
The network business, however, improved its profitability as a
result of a better sales mix, with a larger share of high-margin
software sales. Nokia's network business had a 39.6% gross margin
in the first quarter, up from 34% a year ago.
On a whole, Nokia posted a 239 million euro net loss in the
first quarter, narrowing slightly from a 272 million euro loss a
year ago. The losses came on the back of yet another dismal quarter
for Nokia's handset unit, which last week was transferred to
Microsoft.
The handset unit, now accounted for as part of Nokia's
discontinued operations, saw a 30% yearly sales drop to 1.92
billion euros in the first quarter, Nokia said, while its operating
loss widened to 326 million euros, from a 73 million euro loss a
year ago.
Nokia cited competitive industry dynamics, both for its basic
mobile phones business and the smartphone operations, as the reason
for the sales drop. Without providing details, Nokia said it saw
lower average selling prices for both mobile phones and smartphones
in the quarter. Smartphone volumes were higher on the year, while
unit sales of basic mobile phones fell, Nokia said.
Excluding the performance of the handset unit, Nokia would have
posted a 108 million euro profit in the first quarter, up from a 98
million euro loss a year ago.
Write to Sven Grundberg at sven.grundberg@wsj.com
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