STOCKHOLM – On Thursday, Nokia (NYSE: NOK), the Finnish telecom equipment supplier, reported a 9% rise in third-quarter operating profit on cost cuts and echoed rival Ericsson (NASDAQ: ERIC) in seeing demand recovery in some areas.
However, quarterly net sales fell 8% to 4.33 billion euros ($4.70 billion), missing estimates of 4.76 billion euros due mainly to lower sales to India. That sent its shares down almost 6% in pre-market trading.
Both Nokia and Ericsson said North America has started to show signs of growth after years of weakness. However, Nokia’s market share in the region had dropped after losing contracts with Verizon (NYSE: VZ) and AT&T (NYSE: T) over the years.
“We have seen a really bad cycle… Now that decline is over and it is starting to gradually recover, which is good, but it (telecom) will never be a huge growth market,” CEO Pekka Lundmark said in an interview.
He cautioned that growth was happening more slowly than earlier expected.
“North America has started to show pretty good signs, and we had strong growth in Q3 in network infrastructure,” Lundmark said.
Nokia’s total addressable market in telecom stands at around $84 billion.
To look for growth, Nokia (NYSE: NOK) has been targeting the data center and defense sectors, splurging $2.3 billion to buy U.S. optical networking gear maker Infinera in June to target data center operators.
“That’s where the growth will come from, and that growth is starting already,” Lundmark said.
Demand from Indian clients, which has dropped significantly this year, is also recovering after Nokia last month got a big contract from Vodafone Idea and is expected to get another from Bharti Airtel.
“India will return back to growth next year,” Lundmark said.
Comparable earnings before interest and tax rose to 454 million euros, beating the 424 million euros expected by analysts in an LSEG poll.
Nokia maintained its full-year profit outlook of 2.3 billion to 2.9 billion euros but said it was currently tracking within the bottom half of that range.
($1 = 0.9214 euros)
(Source: ReutersReuters)
