Nokia Q1 2017 results

Ravin Suri says given the Q1 performance, he’s quite optimistic about the year ahead. As a result of a stable strong position, Nokia’s confirming their guidance for the full year of 2017.

http://www.nokia.com/en_int/news/releases/2017/04/27/nokia-corporation-interim-report-for-q1-2017

FINANCIAL HIGHLIGHTS

• Non-IFRS net sales in Q1 2017 of EUR 5.4bn (EUR 5.6bn in Q1 2016). Reported net sales in Q1 2017 of EUR 5.4bn (EUR 5.5bn in Q1 2016).
• Non-IFRS diluted EPS in Q1 2017 of EUR 0.03 (EUR 0.03 in Q1 2016). Reported diluted EPS in Q1 2017 of negative EUR 0.08 (negative EUR 0.11 in Q1 2016).

Nokia’s Networks business

• 6% year-on-year net sales decrease in Q1 2017 primarily due to IP/Optical Networks and Fixed Networks, with approximately flat net sales in Mobile Networks and Applications & Analytics.
• Strong Q1 2017 gross margin of 39.5% and solid operating margin of 6.6%, supported by continued focus on operational excellence, with particularly strong performance in Mobile Networks.

Nokia Technologies

• 25% year-on-year net sales increase in Q1 2017, primarily due to higher patent and brand licensing income and the acquisition of Withings, partially offset by the absence of licensing income related to certain expired agreements. Approximately one third of the net increase was due to non-recurring net sales related to a new license agreement.
• 9% year-on-year operating profit increase in Q1 2017, primarily related to higher net sales, which were partially offset by higher operating expenses. The year-on-year increase in operating expenses was primarily due to the ramp-up of our digital health and digital media businesses and increased licensing-related litigation costs.

Comments from Rajiv Suri:

Nokia’s first quarter 2017 results demonstrated our improving business momentum, even if some challenges remain. We slowed the rate of topline decline and generated healthy orders in what is typically a seasonally weak quarter for us. We also continued to see expansion of cross-selling across our full portfolio, delivered excellent gross margins and improved group-level profitability.

The power of our end-to-end portfolio was again evident in our first quarter results. We saw encouraging stabilization in Mobile Networks topline, our strategy to build a strong software business gained momentum in Applications & Analytics, and Nokia Technologies saw significant year-on-year improvement in sales. This progress offset relative weakness in Fixed Networks and IP/Optical Networks, and allowed us to maintain Networks’ strong gross margin – which was among the strongest Networks has ever delivered for a Q1.

Mobile Networks was clearly the highlight of the quarter. A combination of robust market interest in our advanced LTE solutions, including closing the quarter with 145 4.5G customers, and ongoing cost discipline allowed us to get closer to stabilizing our topline while delivering improved profitability.

Applications & Analytics also showed significant, even if early, signs of improvement. Sales were roughly flat compared to the same quarter last year and new orders were robust. As we move forward, we remain focused on improving profitability in this business.

Fixed Networks, which had an excellent 2016, was impacted by several large deployments coming to an end. Despite this, we are seeing growing traction in cross-selling in markets where Nokia has traditionally been strong, and are continuing to invest in the promising cable market.

In IP/Optical Networks our business is heavily weighted towards communication service providers, and that market is currently quite soft. We are making good progress in expanding our business to new customers, including large internet companies where growth is strong, and expect that a coming IP product refresh will strengthen our competitive position. In addition, we are taking steps to ensure that our cost base is appropriate for current market conditions while continuing to invest as needed to maintain long-term competitiveness. Despite these challenges, I am confident that we are taking the right steps in the right way to deliver medium-term improvements in both IP/Optical Networks and Fixed Networks.

Overall, given Nokia’s performance in the first quarter, I am optimistic about the year ahead, even if cautiously so. Our competitive position is strong, we are executing well, and, as a result, we are able to confirm our guidance for full-year 2017.

Category: Nokia