Nokia has posted its Q1 2015 results and it is a mix bag!! While Sales growth has been strong Year on Year, Networks profitability has taken a dip. Nokia Technologies and HERE have posted both sales and profitability growth. Nokia has also posted a positive outlook for the full year 2015.
Strong year-on-year sales growth; Weak Nokia Networks profitability compensated by good performance by Nokia Technologies and HERE
- Net sales in Q1 2015 of EUR 3.2 billion (EUR 2.7 billion in Q1 2014), up 20% year-on-year
- Non-IFRS diluted EPS in Q1 2015 of EUR 0.05 (EUR 0.04 in Q1 2014), an increase of 25% year-on-year; reported diluted EPS in Q1 2015 of EUR 0.05 (EUR 0.03 in Q1 2014), up 67% year-on-year
- 15% year-on-year net sales growth driven by growth in four out of our six regions, with non-IFRS operating margin declining to 3.2% from 9.3%
- 21% year-on-year growth in Global Services net sales, primarily driven by strong growth in the network implementation business line. 10% year-on-year growth in Mobile Broadband net sales, primarily driven by overall radio technologies, particularly LTE
- 61% year-on-year decline in non-IFRS operating profit primarily driven by lower software sales, lower non-IFRS gross profit in the systems integration business line, the short-term impact of strategic entry deals, higher non-IFRS operating expenses due to foreign exchange impacts and increased investments in LTE, 5G and cloud core, and more challenging market conditions
- 25% year-on-year growth in net sales, with 29% year-on-year increase in sales of new vehicle licenses for embedded navigation systems
- 90% year-on-year growth in non-IFRS operating profit, with non-IFRS operating margin expanding to 7.3% from 4.8%
- 103% year-on-year growth in net sales and 124% growth in non-IFRS operating profit, primarily due to non-recurring adjustments to accrued net sales from existing agreements, revenue share related to previously divested intellectual property rights, and intellectual property rights divested in the first quarter 2015. In addition, net sales and non-IFRS operating profit benefitted from higher intellectual property licensing income from existing licensees.
This is what Nokia CEO Suri has to say about the results,
Nokia delivered a 20% increase in net sales and 25% increase in earnings per share in the first quarter. Underlying these results was excellent performance from HERE and Nokia Technologies, while good growth at Nokia Networks was offset by unsatisfactory profitability.
I remain confident that our lean operating model, ongoing focus on cost management, and the current strength of our portfolio will enable us to meet our 2015 goals for Nokia Networks. The business delivered healthy year-on-year growth even after adjusting for currency fluctuations, although a number of factors in the quarter had a negative impact on profitability. We expect some of these negative factors to ease, particularly in the second half of 2015.
HERE’s excellent momentum in the automotive sector continued, helping the business deliver 25% year-on-year growth and improved profitability. As we proceed with the strategic review that we announced on April 15, we are considering our options in order to determine what is best for Nokia shareholders and best for HERE. I am very pleased with HERE’s performance and firmly believe that it will have a bright future, either with Nokia or with new ownership.
Nokia Technologies also had a strong quarter with year on year sales up more than 100% and operating margin up sharply both year-on-year and sequentially. The business benefitted in the quarter from some non-recurring effects and revenue share from previously divested intellectual property rights. I am more confident than ever that licensing activities are tracking well and that there is a robust pipeline of potential new licensees. In addition, I believe that we are focusing on the right innovation opportunities and that the necessary cost discipline is in place.
Shortly after the end of the quarter, we announced a landmark deal with Alcatel-Lucent. The strategic logic of this proposed transaction is strong and we believe that it will provide long term benefits to shareholders of both Nokia and Alcatel-Lucent. We are moving fast on the necessary integration planning, and have already established a structure designed to minimize disruption to our ongoing business. We will bring the same operational discipline to our integration activities that we have successfully applied to the earlier transformation at Nokia Networks.
Nokia 2015 outlook:
|Nokia Networks||FY15 Net sales||Increase YoY|
|FY15 Non-IFRS op. margin||Around the midpoint of the long-term range of 8% – 11% for the full year (update)||Based on factors including competitive industry dynamics, product and regional mix, the timing of major network deployments, and expected continued operational improvement.This is an update to the earlier non-IFRS operating margin outlook to be in line with the long-term range of 8%-11% for the full year.|
|HERE||FY15 Net sales||Increase YoY|
|FY15 Non-IFRS op. margin||9% – 12% (update)||Based on factors including leading market position, positive industry trends and improved focus on cost efficiency.This is an update to the earlier non-IFRS operating margin outlook to be between 7%-12% for the full year.|
|Nokia Technologies||FY15 Net sales||Increase YoY||Excludes potential amounts related to the expected resolution of our arbitration with Samsung. Based on factors including higher investment in licensing activities, licensable technologies and business enablers, including go-to-market capabilities, which target new and significant long-term growth opportunities.|