Nokia’s Marginal Profit from 5G Telecom Demand amid Supply Disruption

A leading Finnish telecom company, Nokia Corp. or Nokia disclosed on Thursday, April 30, 2020, that the company managed to retain a small portion of profit in the first quarter (Q1) from the demand for its new 5G telecoms equipment.

Meanwhile, it was also reported that the Finnish company suffered a 2% fall in Q1 revenue by nearly about 200 million euros ($217 million) due to the disruption of its supply from operations in China prompted by the coronavirus pandemic.

Marginal Profits amid Upcoming Challenges

The Finnish company has been facing tough competition from its main rivalries including Chinese Huawei Technologies Co., Ltd. (Huawei), and Swedish Telefonaktiebolaget LM Ericsson (Ericsson) in search of markets for 5G industry. Nokia is currently looking forward to working together with the US telecom companies in developing 5G networks.

While Ericsson and Huawei have reported the growth of their revenues in Q1 of the year due to strong demand for telecom service during the pandemic, Nokia reported that its January-March revenues fell to 4.9 billion euros, missing the analysts’ expectation of 5.1 billion euro, according to Refinitiv data.

Nonetheless, “Nokia generated Q1 underlying profit of 1 cent per share, beating analysts forecast for breakeven, and a loss of 2 cents per share in the same period last year,” a source reported.

Although Nokia has set 70 commercial 5G deals so far, the company projected that the major impact of the virus pandemic would be seen in the current quarter. Anticipating a strong impact in the second half of the year, the company had lowered its full-year earnings forecast to 23 euro cents from 25 euro cents while Analysts had expected 24 euro cents.

Nokia’s 5G Networks and Equipment

Nokia has been putting its dividend distribution on hold due to a profit warning last October and is currently waiting to receive a former executive from the energy group, Fortum, Pekka Lundmark, who is going to replace the existing CEO Rajeev Suri in September.

The Finnish company, which has been facing a struggle to reduce costs and tackle delays in shipment, disclosed that it has handled well the problems and its new 5G ReefShark equipment was reportedly increased in shipment. Inderes analyst Mikael Rautanen wrote in a note, “As was expected, new uncertainties have been added to the outlook due to the pandemic but solving the company’s internal problems seems to progress on schedule.”

Earlier, Nokia expressed that its Reefshark-based 5G system-on-chip (SoC) development, which allows a single chip to carry an entire computer system, to have a significant impact on reducing its production costs.

As Reuters explained, “Reefshark chipsets increase data-handling capacity for mobile towers and accounted for 17% of Nokia’s 5G shipment in the quarter and the company expects it to reach 100% by 2022.” Meanwhile, Nokia has recently gained its presence in North America, its largest market, to counter losses that occurred in the Asia Pacific.

I’m Roshan, a journalist, blogger and music lover. I like covering global news related to finance, business, and technology. Focusing on the collection of true and reliable information, I rely on working by conducting interviews with business leaders and talking to the inside sources of companies.

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