BARCELONA, SPAIN – FEBRUARY 26: A logo lights up at the Nokia booth at Mobile World Congress 2024 on February 26, 2024 in Barcelona, Spain. (Photo by Xavi Torrent/Getty Images)
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Shares of Finnish Telecom Nokia It fell on Thursday after the company reported a 32% drop in second-quarter operating profit on the back of weak demand for its 5G equipment.
The company’s Helsinki-listed stock fell 8% at 9 a.m. London time, shortly after the market opened.
Earlier, Nokia said Its comparable operating profit fell to 423 million euros ($462 million) in the second quarter, down nearly a third from the 619 million euros posted in the same period last year.
Citing “ongoing market weakness”, net sales also fell 18% to 4.47 billion euros – the lowest level reached since the fourth quarter of 2015, according to LSEG data.
“The most significant impact was the challenging year-ago comparative period, which saw India’s rapid 5G deployment peak with India accounting for a three-quarter decline.” Nokia CEO Pekka Lundmark said in the earnings release.
The landscape remains challenging as operators remain cautious in the field of mobile networks, he warned.
Nevertheless, based on the order intake experienced in the latest quarter, Nokia predicted a “stabilizing” industry environment and a “significant acceleration in net sales growth in the second half.”
“While the dynamic is improving, the net sales recovery is happening somewhat later than we previously expected, which is impacting our business team’s net sales assumptions for 2024,” Lundmark said. “However, we remain firmly on track to achieve our full-year outlook, supported by our rapid action on spending.”
The company is targeting a performance towards or below the midpoint of its comparable operating profit guidance of between 2.3 billion and 2.9 billion euros for the full year.
Nokia suffered a major blow late last year when it lost a major North American contract when US telecommunications juggernaut AT&T chose Ericsson as a supplier to build its telecommunications network, known as ORAN technology.
The Finnish company and Swedish rival Ericsson have embarked on steep cost-cutting plans, amid an industry-wide battle to reduce the economy and mobile operators’ infrastructure costs. In October, Nokia announced 14,000 job cuts following a third-quarter revenue decline, with the aim of cutting its total costs by 800 million to 1.2 billion euros by 2026.
The company said on Thursday that it had made “significant progress” in its cost-savings program and had taken steps to reduce costs by 400 million euros to date.
— CNBC’s Arjun Karpal contributed to this report.
