Nokia Warns Network Sales to Fall
November 15 2016 - 4:30AM
Dow Jones News
Telecom-equipment maker Nokia Corp. said it expects its networks
business to decline further next year, while vowing to ramp up
cost-savings as it struggles with weak demand and fierce
competition.
The Finnish company said that it expects 2017 net sales of
networks, its core business, to decline in line with its primary
addressable market, which it estimated to shrink by a low single
digit percentage. The firm flagged this warning in an investor
briefing in Barcelona on Tuesday.
Nokia said the outlook was influenced by "competitive industry
dynamics," and the "timing of major network deployments," among
other things.
Over the past year, the telecom-gear industry has been hit by
slowing demand by telecom carriers, as many of them have finished
rolling out of latest-generation wireless networks, or 4G. At the
same time, Nokia and its European peer Ericsson AB of Sweden are
battling stiff competition from Chinese companies, such as Huawei
Technologies Co.
Last month, Nokia reported a third-quarter net loss and a 12%
year-over-year decrease in network sales.
Rajeev Suri, Nokia's chief executive, said the company's plan to
save €1.2 billion ($1.3 billion) annually by 2018 is on target, but
added that restructuring and other charges related to it are
expected to amount to €1.7 billion, compared with an estimate of
€1.2 billion earlier.
The company said the update stems from plans to mitigate a more
challenging-than-expected market environment, with additional
transformation initiatives, such as a further streamlining of sales
costs and optimizing the use of its various sites.
To cater for telecom carriers' demand for a broader range of
products, Nokia has acquired French rival Alcatel-Lucent SA, a
specialist in fixed internet gear such as routers and switches.
"We aim to target superior returns through focused growth into
more attractive adjacent markets, where high-performance,
end-to-end networks are increasingly in demand," Mr. Suri said.
Nokia said it expects to increase its operating margin for its
networks business next year to between 8% and 10%, from an
estimated margin of 7% to 9% for full-year 2016. Nokia targets a
long-term operating margin for its business of between 10% and
15%.
For 2016, Nokia said it targets a proposed dividend of €0.17 per
share, subject to shareholder approval in 2017.
(END) Dow Jones Newswires
November 15, 2016 04:15 ET (09:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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