Nokia is moving into the growth path of 5G as a new sales strategy takes shape

Finnish telecommunications network equipment manufacturer Nokia showed on Thursday how the new strategy drove sales growth in network and 5G equipment, helped increase first-quarter revenue and profit, and increased its shares by 14 percent.

Nokia and a Swedish competitor Ericsson have gained more customers as telecom operators start operations 5G networks and China Huawei growing governments to curb security concerns.

“This year, we are seeing high demand for 5G and also network infrastructure, which is basically fiber connections to homes and offices,” CEO Pekka Lundmark said in an interview.

After taking on a top position last year, Lundmark has streamlined Nokia’s operations, cut jobs and made changes to recover from product failures from the company’s previous management that violate 5G targets and weigh on its shares.

“We expect the typical quarterly earnings season to be less clear in 2021,” Lundmark said.

Demand for infrastructure caused by the pandemic is now spread throughout the year, easing seasonality, which previously led to higher growth in the fourth quarter.

Quarterly revenue rose 3 percent to € 5.08 billion (approximately SEK 45,600), exceeding the consensus figure of EUR 4.72 billion (approximately SEK 42,370), according to Refinitiv IBES.

“These are solid results and a good start to the year for Nokia,” said Richard Webb, an analyst at CCS Insight. “In particular, an operating profit margin of 11% looks good and shows that the restructuring will have a positive effect.”

Sales of Nokia’s network infrastructure business, which includes optical and fixed network products, increased 28 percent to EUR 1.73 billion (approximately SEK 15,530) due to demand from corporate customers.

Quarterly earnings rose to 5 cents (roughly Rs. 5) per share, while adjusted earnings were 7 cents (roughly Rs. 6) per share. Analysts had expected 1 cent (roughly Re. 1).

Its comparable gross margin rose to 38.2 percent from 36.4 percent a year earlier, mainly due to an increase in 5G.

Nokia maintained its full-year revenue forecast of EUR 20.6 billion (approximately SEK 1.84,940) to EUR 21.8 billion (approximately SEK 1,95510), which was broadly in line with expectations.

Ericsson last week announced quarterly higher-than-expected profit margins and the introduction of 5G.

© Thomson Reuters 2021