Stockholm: Wireless equipment maker Nokia Oyj reported an unexpected quarterly loss as it took an early hit in the battle to supply the next generation of mobile networks.
The results make it harder for Nokia to meet its 2019 earnings targets and the Finnish vendor said it was now under “significant pressure on execution in the second half.”
The loss contrasts with a strengthening performance by Swedish rival Ericsson AB, which last week published stronger than expected results while warning that it is taking contracts on less lucrative terms to secure longer-term work.
Nokia’s shares have gained 2.6% this year, underperforming Ericsson which is up 22%.
Both Nordic vendors are trying to capitalise on the woes of their Chinese rival Huawei Technologies Co, which faces headwinds in several countries over concerns that its equipment could be used for state-sponsored espionage.
Britain is expected to become the latest Western country to announce measures that could make it tougher for Huawei to do business.
The benefits for its two main rivals could take years to emerge, however, as all three jostle for vital early contracts on 5G that will help them to lock in longer-term revenue.
“The first quarter was really weak, but still it’s the same story that at the end of the year it will take off at a steeper slope, driven by 5G deliveries,” said Mikael Rautanen, an analyst at Inderes. “This is testing for nerves.”
Nokia had already said spending on 5G networks would be skewed toward the second half of this year.
Chief executive officer Rajeev Suri said yesterday that competitors were being more “commercially aggressive” in the early stages of the rollout.
This was happening, he said, as “some customers reassess their vendors in light of security concerns, creating near-term pressure but longer-term opportunity.
Nokia reported an adjusted operating loss of of 59 million euros (US$66mil), compared with an average profit estimate of 282.7 million euros in a Bloomberg survey. It repeated its forecast for earnings per share of between 25 and 29 euro cents this year and slightly positive recurring free cash slow.
It said that it was unable to recognise approximately 200 million euros of net sales related to 5G deliveries in the first quarter, mainly in North America, “which we expect to recognise in full before the end of 2019.” — Bloomberg