Nokia profit grows as net­works di­vi­sion leads turn­around


Nokia en­joyed a solid 60 per­cent rise in net profit in the sec­ond quar­ter, with a good per­for­mance in its core net­works di­vi­sion sug­gest­ing the Fin­nish com­pany is suc­ceed­ing in turn­ing its busi­ness around since selling its hand­sets op­er­a­tion to Mi­crosoft in 2013.

The profit of 347 mil­lion eu­ros (US$383 mil­lion) beat ex­pec­ta­tions and Nokia’s stock jumped more than 10 per­cent dur­ing the day but set­tled to close up more than 7 per­cent at 6.42 eu­ros on the Helsinki Stock Ex­change.

Over­all sales in the pe­riod in­creased 9 per­cent to 3.2 bil­lion eu­ros, helped by cur­rency fluc­tu­a­tions but also in­creased de­mand for soft­ware in mo­bile broad­band and global ser­vices.

Hannu Rauhala, se­nior an­a­lyst at Po­hjola Bank, said the fig­ures had dis­pelled fears among in­vestors that Nokia would suf­fer from a gen­eral slug­gish­ness in global net­work busi­ness.

“It was a good per­for­mance for Nokia, and I think mar­kets had been wor­ried that it too would have shown signs of the gen­eral slow­down in the in­dus­try,” Rauhala said. “But it’s a long-term busi­ness and we’ll have to see what hap­pens next year.”

Nokia said that the net­works unit, which ac­counts for 85 per­cent of to­tal rev­enue, was ex­pected to see growth of some 8 to 11 per­cent for the full year. It also ex­pects im­prove­ment in the other two re­main­ing sec­tors, HERE map­ping ser­vices and Nokia tech­nolo­gies, which man­ages the lu­cra­tive li­cens­ing port­fo­lio.

CEO Ra­jeev Suri says he was “par­tic­u­larly pleased” with the per­for­mance of the net­works sec­tor, but noted that im­prove­ment in all three units has made the Fin­nish com­pany “well po­si­tioned to de­liver on our full-year 2015 com­mit­ments.”

How­ever, he warned that tele­com in­fra­struc­ture con­di­tions would re­main chal­leng­ing re­quir­ing fur­ther sav­ings, and said that although Nokia will fo­cus on soft­ware sales as “the in­dus­try con­tin- ues its hard­ware to soft­ware mi­gra­tion,” harder times lay ahead.

“De­spite these un­der­ly­ing im­prove­ments I would cau­tion against any as­sump­tions that soft­ware share would be at a sim­i­lar level in com­ing quar­ters. We are start­ing to see more dif­fi­cult sea­son­al­ity pat­terns with stronger quar­ters in Q2 and Q4 off­set by weaker first and third quar­ters,” Suri told an­a­lysts dur­ing a con­fer­ence call.

“We re­main highly fo­cused on re­duc­ing costs and im­prov­ing ef­fi­ciency in or­der to mit­i­gate the im­pact of mar­ket con­di­tions,” he said.

Suri noted that HERE map­ping ser­vices had done “ex­cel­lent work,” ex­pand­ing its real- time traf­fic ser­vice from 44 to 50 coun­tries with voice-guided nav­i­ga­tion in 53 lan­guages.

He didn’t com­ment on ru­mors that its maps unit was be­ing sold to auto com­pa­nies, but said that the “strate­gic re­view of that (HERE) busi­ness is now in an ad­vanced stage” and that Nokia would fo­cus on “the best in­ter­ests of its share­hold­ers and the longterm fu­ture of HERE.”

Af­ter be­ing the No. 1 global mo­bile phone maker for 14 years, Nokia seemed to run out of steam and was un­able to meet the chal­lenges of Ap­ple’s iPhone, Sam­sung and Asian phone mak­ers. It has, how­ever, man­aged to stage a turn­around since selling its un­prof­itable hand­set unit to Mi­crosoft for 5.4 bil­lion eu­ros in 2013.

The new, scaled- down com­pany launched a tablet this year and says it is seek­ing a part­ner to re­turn to the cell­phone busi­ness. Ear­lier this week it an­nounced the up­com­ing launch of a vir­tual re­al­ity cam­era, an in­no­va­tive ball-shaped video-cam with eight syn­chro­nized shut­ter sen­sors and in­te­grated mi­cro­phones for spa­tial au­dio.

In its big­gest move since team­ing up with Mi­crosoft in 2011, Nokia bought the ail­ing French tele­com com­pany Al­ca­tel-Lu­cent in a 15.6 bil­lion-euro deal, which was ap­proved by the Euro­pean Union last week.


This Tues­day, July 28 photo shows Nokia head­quar­ters in Espoo, Fin­land.

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