Nokia slipped to a net loss during Q4 2017, as one-off patent payments during the period barely masked an ongoing struggle in its Networks business.
In a statement, CEO Rajeev Suri (pictured) warned the situation with its Networks business was not likely to improve in the near future, despite signs of improvements in North America, as he pinned his hopes for the division on 5G.
“Looking forward on the Networks side, we expect our market to decline again in 2018, although at a slower rate than our previous forecast, given early signs of improved conditions in North America,” he said: “For 2019 and 2020, we expect market conditions to improve markedly, driven by full-scale rollouts of 5G networks.”
Nokia, like its major rival Ericsson, is facing up to a period of declines as operators reduce spending on LTE equipment. The companies, along with Chinese vendors Huawei and ZTE, are now making investments in 5G development in the hope of engineering a sales turnaround when operators are ready to launch networks in and around the 2019 to 2020 timeframe.
However, Suri warned an increase in 5G investment also means Nokia’s operating margin “will come under some pressure in 2018”.
At group level, Nokia slipped to a loss of €378 million in the recent quarter from a profit of €658 million in Q4 2016. Sales of €6.6 billion were broadly flat year-on-year.
Nokia’s performance was boosted by a one-off payment from Huawei relating to a licensing deal struck in the final quarter of 2017, and a favourable ruling related to a contract dispute with BlackBerry. Combined, the payments amounted to a total one-off gain of €210 million.
Indeed Nokia Technologies, which houses patent licensing along with its health and digital media activities, was a bright spot in Q4: the unit delivered revenue of €554 million compared with €309 million in the 2016 quarter, with an operating profit of €389 million. Its performance was primarily driven by new licence agreements. In addition to Huawei, Nokia struck similar deals with Apple, Xiaomi and LG Electronics.
Networks, as mentioned, did not fare as well, with operating profit for the unit declining 25 per cent year-on-year to €647 million. Sales in the division dipped 4 per cent to €5.8 billion which was attributed to large year-on-year variations in foreign exchange rates. On a constant currency basis, Nokia said net sales for the unit increased 2 per cent, driven by IP Networks and Applications and by Ultra Broadband Networks.