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Q3 2020 another strong Nokia quarter with surge in profitability

Nokia has now posted earnings for the Third quarter of 2020 today. The highlights for this quarter are surge in profitability, continued 5G  momentum and strong growth in Mobile Access portfolio.

Nokia has raked in a positive operating profit in both Q3 and first nine months of 2020. Here are the earning highlights.

Earning highlights:

  • Continued improvements in our Mobile Access portfolio; reducing product costs and improving product performance; commitment to invest in R&D to drive product leadership
  • 7% year-on-year decrease in net sales, largely driven by lower services within Mobile Access, consistent with our expectation for lower network deployment services
  • Strong year-on-year growth in Nokia Enterprise
  • Continued margin expansion year-on-year, primarily driven by Mobile Access and Optical Networks
  • Positive operating profit, on a reported basis, in Q3 and first nine months of 2020
  • Solid free cash flow in Q3 and the first nine months of 2020
  • Adjusted 2020 outlook midpoints for non-IFRS EPS to EUR 0.23 (from EUR 0.25) and operating margin to 9.0% (from 9.5%), with the new midpoints and ranges within the previously provided outlook ranges
  • Provided new outlook for 2021 non-IFRS operating margin of 7-10%
  • Long term outlook to be provided latest at the Capital Markets Day on March 18, 2021

CEO’s statement:

Here is what the new Nokia CEO Pekka Lundmark has to say about the Q3 results.

In my first quarter as CEO of Nokia, I have seen both opportunities and challenges. As our solid Q3 results demonstrate, we are making good progress in many parts of our business. Profitability was up on a year-on-year basis, we had the fifth consecutive quarter of solid free cash flow, Nokia Enterprise maintained its double-digit growth, and we continued to strengthen the competitiveness and cost position of our mobile radio products.

When I look ahead, however, the good progress we have made is not enough. Our financial performance in 2021 is expected to be challenging, and more change is needed. We have lost share at one large North American customer, see some margin pressure in that market, and believe we need to further increase R&D investments to ensure leadership in 5G. In fact, we have decided that we will invest whatever it takes to win in 5G. Our customers are counting on us and we will be there for them.

We announced separately today some important changes to our operating model. The goal of this new model is to better align with the needs of our customers, and through that improve our performance and create shareholder value. The changes announced today mark a shift from end-to-end as a strategic principle to a more focused approach with each business group having a distinct role in our overall strategy.

Each of the four new business groups will have P&L responsibility and ownership of creating a path to becoming one of the market leaders in their respective sector. The changes optimize our operating model for better accountability and transparency, increased simplicity and cost-efficiency.

We plan to share more details about our strategy in December and at a Capital Markets Day in March. A more rigorous approach to capital allocation will be key to our strategic direction. As a technology company we will invest to win in those segments where we choose to compete.

Equally important is our view of the future, where we see an opportunity to lead in “network-as-a-service” business models for telecom operators and enterprise customers. This change offers a broad opportunity for Nokia to provide a trusted, software-led and cloud-based network capability that can be rapidly integrated, deployed, and self-managed as a complete service, allowing us to move up the value chain and provide additional “network plus” value-adding services. This vision will take time to become a reality, but Nokia is well positioned to win given our deep experience in delivering carrier-grade network performance and extensive work with webscale companies and enterprises.

I have no doubt that the potential of Nokia is substantial, even if delivering on that promise will take time. We expect to stabilize our financial performance in 2021 and deliver progressive improvement towards our long-term goal after that. We intend to provide an update on long-term outlook at the latest on Capital Markets Day. I am confident that with the right strategy, focus, and operating model we will be successful. Today, we embark on that journey.

Nayan
Nayan has more than 10 years of experience of covering Technology and innovations. He is a big Nokia fan and Tech disruptions aficionado. He loves to review new cool gadgets and writing about Android, iOS, Gadgets and general Technology stuff. He has been associated with other well-known Tech sites WinCentral and GadgetOx since long. He currently sports a Lumia 950 XL and Nexus 5X. Other interests include listening to Nu-Metal Hits and Kick-Boxing. Write to him at Email: [email protected]
http://www.nokiapoweruser.com
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