Nokia’s new Q3 numbers failed to make an impression in the market due to flaw in its Networks business, even as its exclusive rights of licensing unit did its best to make up for it.
The company is upset about its shareholders and pass a statement that it expects market conditions for full year 2017 to be “slightly more challenging than earlier anticipated”, with a “4 % to 5% decline in the main addressable market for Nokia’s Networks business”, compared with previous direction of 3% to 5%.
It also noted “uncertainty related to the timing of completions and acceptances of certain projects”; “robust competition in China”; and “uncertainty related to potential mergers or acquisitions by our customers”.
CEO Nokia Rajeev Suri (pictured), said:
“The performance of our patent licensing business was the clear highlight of the quarter,” citing “a favorable arbitration outcome with LG” which led to an agreement for a longer licensing deal.
“With this fast and effective execution against our patent licensing strategy, we have approximately doubled our recurring licensing revenue from €578 million in 2014. I am also particularly pleased that in 2017 the growth in patent licensing has helped to offset the sales decline on the Networks side,” he added.
Figures
Networks operating profit of €334 million was down 23% yearly, on sales of €4.8 billion, downhill 9%. There was weak spot in Greater China (down 20%), North America (16%), Latin America (10%) and Europe (7%).
Quarterly mobile networks sales of €1.6 billion were down by 17%.
“I have noted in previous quarters that the R&D team in this business group has faced an extraordinarily high workload. Given this situation, we have seen some issues with the time taken to converge some products that have, unfortunately, impacted a small number of customers,” Suri said.
There were positives in the Networks unit. The company saw constant currency year-on-year growth in Global Services and IP Routing, as well as in its Middle East and Africa, and Asia-Pacific regions. Orders were also up in the Applications & Analytics business, which recorded its fifth consecutive quarter of order growth, “showing the progress we are making in our strategy to build a strong, stand-alone software business”.
Networks gross margin also enhanced: “a remarkable achievement in the context of a market that remains challenging”, Suri noted.
Nokia Technologies, which houses the exclusive rights licensing activities by the side of Nokia’s health and digital media activities, produced an operating profit of €390 million, upbeat 73 % annual, on revenue of €483 million, up 37% by taking benefit from the deal with LG.
About €474 million of returns was associated to patent and brand licensing, and only €9 million generated by means of digital health and digital media.
On a whole, Nokia made a €141 million damage accusation related to its digital health business, having adjusted its enduring cash flow outcrop for the unit: “Going forward, Nokia Technologies seeks to have a better impact with consumers and the medicinal area through a more focused, more responsive digital health business”.
Nokia previously made an announcement and share its plans to decrease its investments in the VR space industry.
In a complete picture, Nokia reported a loss attributable to shareholders of €192 million, in contrast to a prior-year loss of €119 million, on profits of €5.5 billion, down 7%.
“In short, Q3 was a period in which we faced some challenges, but delivered good performance in many areas as well as momentum in the execution of our strategy,” the CEO concluded.
