Nokia has offered hope to investors that it is on the path to profitability after higher margins on 5G equipment helped deliver a profit despite the impact of coronavirus.
The Finnish telecoms giant competes with the likes of Huawei, Ericsson, Cisco and Samsung in the 5G equipment sector, and believes its end-to-end capabilities are a key differentiator.
However this intense competition coupled with the high cost of development has seen the company reduce outlooks and pause dividends in recent months. There has been speculation that a possible merger or sale of assets was being considered with a recent report suggesting the company was bracing itself for a hostile takeover.
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Nokia results
However despite revenues falling by 2 per cent to €4.9 billion in the first quarter, the company was able to post a small profit of €33 million. This compares favourably with the €116 million it lost during the same period last year.
Network revenues dropped by five per cent, with the company saying supply chain issues in China had cost €200 million. However it anticipates that the biggest impact of disruption caused by Covid-19 will be in the current quarter.
Although this means there could be short-term impact by the crisis, outgoing Rajeev Suri said the company was well-positioned to ride any storm. Nokia’s 5G development teams are working remotely, while Suri said that despite issues in China, the company’s supply chain was sufficiently dispersed to avoid any major interruption.
“These improvements are, of course, coming at a time of unprecedented change, given the impact of COVID-19,” he said. “Our top focus areas are protecting our employees, maintaining critical network infrastructure for customers, and ensuring we have a strong cash position.
“We did not see a decline in demand in the first quarter. As the Covid-19 situation develops, however, an increase in supply and delivery challenges in a number of countries is possible and some customers may reassess their spending plans.
“Pleasingly, despite the majority of our R&D employees working from home, we have not seen any impact on our roadmaps, and, in fact, some key software releases are proceeding ahead of schedule. Additionally, we saw a massive increase in network capacity demands.
“We expect the majority of this Covid-19 impact to be in Q2 and believe that our industry is fairly resilient to the crisis, although not immune.”
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