Nokia loss narrows in the first quarter

HELSINKI: Finland’s telecoms giant Nokia Oyj reported yesterday that it remained deep in the red at the start of the year, with sales in its main business, networks, on the decline.

But the stock market rejoiced as analysts’ fears of a much worse performance were allayed.

The company posted a loss of €488 million ($532 million) in the first quarter, an improvement from the €609 million a year earlier, prompting chief executive Rajeev Suri to say he believed in an “improving business momentum, even if some challenges remain”.

Investors agreed with that assessment, sending Nokia’s share price more than six percent higher on the Helsinki stock exchange to €5.29 by late morning.

While the company’s overall sales declined by 2% to €5.38 billion, sales in its core networks business fell by 6%, to €4.9 billion.

An analyst at Aurel BGC, a Paris brokerage, called the results “quite reassuring” because investors had been expecting a steeper decline in networks revenues.

“Markets have known for a long time that the trend is not very good,” he told AFP.

Most importantly, profit margins were better than those generated by Swedish rival Ericsson AB, the analyst said.

Ericsson on Tuesday reported an operating loss of 12.3 billion Swedish crowns ($1.4 billion) as previously announced provisions, writedowns and restructuring costs pushed it deep into the red.

“We saw encouraging signs of stabilisation in mobile networks,” Suri told reporters in a conference call.

“The company is eyeing business opportunities offered by the path to 5G roadmap,” he said, referring to the worldwide rollout of the lightning-fast 5G mobile internet service that operators expect to begin by 2020.

Once the world’s number one handset maker, Nokia transformed itself into a network equipment company and bought its hugely unprofitable French-American rival Alcatel-Lucent SA a year ago, sending the whole group’s results plunging into the red in 2016.

The firm recorded a net loss of €766 million last year, which Suri said in a statement was a “year of transition.”

But in fact the company has been going through a process of radical transformation for several years now.

In 2013, it bought 50% of its network activities from Germany’s Siemens AG, and the following year it pulled out of mobile phones.

It sold its mapping unit Here in 2015 and completed the deal late last year to buy Alcatel-Lucent, which had only recorded one year of annual profit since its inception in 2006.

Nokia was the world’s top mobile phone maker between 1998 and 2011 but was overtaken by South Korean rival Samsung Electronics Co Ltd after failing to respond to the rapid rise of smartphones.