Nokia Oyj said that a near-term decline in operator demand for 5G gear in a worsening economy comes against a backdrop of a “substantial need” to invest in those networks globally.
Challenges stemming from a deteriorating economic outlook and customers working through existing inventory intensified in the second quarter and are set to continue in the second half, the Espoo, Finland-based company said in a statement Thursday, echoing remarks from last week when it cut its full-year guidance.
“In Mobile Networks there is still substantial need for operators to invest in 5G globally with only approximately 25% of the potential mid-band 5G base stations so far deployed outside China,” Chief Executive Officer Pekka Lundmark said. In the Network Infrastructure business the company believes the headwinds are “mostly short-term in nature,” he said.
“We now see second-half net sales broadly similar to the first half in both Network Infrastructure and Mobile Networks with some sequential improvement visible into the fourth quarter,” he said.
Nokia last week delivered an unscheduled profit warning, cutting its full-year guidance due to a weakening fifth-generation mobile equipment market. It’s facing macro-economic headwinds as customers continue to work through inventories that had grown during global supply-chain disruptions. Nokia’s statement echoed a gloomier outlook from Swedish competitor Ericsson, which similarly had said that its North American business was facing low sales as carriers continue to reduce inventory levels.
As disclosed in the preliminary release, the company now expects to book sales of €23.2 billion to €24.6 billion this year, less than its forecast had been, and a comparable operating margin in a range of 11.5% to 13%, with the top end of that range previously seen at 14%.
Nokia had on Friday unveiled second-quarter net sales of about €5.7 billion, flat year-on-year on a constant currency basis, and with a comparable operating margin of 11%. The quarter included a €80 million benefit from catch-up net sales in Nokia Technologies.
The company also reiterated the message that it would continue to take measures to remain on track to meet its long-term targets — growing faster than the market and delivering a comparable operating margin of at least 14%.
Key Figures
- Second-quarter adjusted operating profit €626 million, estimate €758.3 million
- Second-quarter adjusted gross margin 38.8%, estimate 38.9%
- Second-quarter adjusted earnings per share €0.07, estimate €0.08
