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Finnish manufacturer of telecommunications equipment Nokia reported a smaller-than-expected rise in quarterly profit on Thursday as sluggish demand for 5G devices in key markets North America and India continued to weigh on sales.
“This will still be a weak year for the mobile RAN (radio access network) market and, as I said, we expect it to gradually pick up over the course of the year,” CEO Pekka Lundmark told reporters.
A decline in demand for 5G devices in North America, Nokia’s largest market and its Swedish competitor Ericssonand market share losses in China have forced each to temper their expectations and lay off 1000’s of employees to chop costs.
Operating profit in the primary quarter, excluding certain income and expense items and supported by cost reductions, was 597 million euros, a rise from 479 million a yr ago, as sales fell 19% at constant exchange rates.
Four analysts surveyed by LSEG had forecast a mean profit of 663 million euros.
Shares in Nokia reversed course, rising 1.5% at 0801 GMT, after falling 3% earlier.
In a note to clients, JPMorgan analysts said Nokia’s weak sales trends were the explanation for the profit miss, but added that the corporate was well positioned for a recovery.
CEO Lundmark said the development in orders seen late last yr continued in the primary quarter despite ongoing challenges out there.
The mobile networks segment, which books orders for 5G devices, posted a 37% decline in local currency sales within the quarter, which Nokia said represents a low point this yr and expects a recovery for the remaining of 2024.
Nokia back in January predicted demand would recuperate within the second half of 2024. Ericsson said on Tuesday that sales would normalize within the second half of the yr.
Network Infrastructure revenue declined 26% in each local currencies and net terms.
“Overall, the slowdown at the beginning of the year will put more pressure on the rest of the year and it looks like the sustainability of Nokia’s forecast will be under pressure again until the end of the year,” said Inderes analyst Atte Riikola .
PP Foresight’s Paolo Pescatore said Nokia and Ericsson’s medium- to long-term confidence out there was encouraging, but said macroeconomic uncertainty, elections and ongoing geopolitical tensions remained major concerns.
Nokia on Thursday repeated a forecast it made in January for comparable operating profit in 2024 of two.3 billion to 2.9 billion euros.
The comparable gross margin increased from 37.7% to 48.6%.
