Telecoms equipment vendor Nokia, has posted solid Q1, 2020 results showing a broad year-on-year profitability improvements as the company’s transformation and product cost reduction efforts started to take hold.
On a year-on-year basis, group-level non-IFRS operating margin was up by 3.6% while networks gross margin increased by 3.5%.
According to the vendor Nokia Software had an excellent quarter with sharp margin improvements and strong momentum with customers in North America.
Rajeev Suri, president and CEO, Nokia said Nokia Enterprise delivered double-digit sales growth. “As I noted last quarter, we continue to have a sharp focus on mobile access and cash generation and saw good progress in both areas in the first quarter,” he said.
Suri added that “5G powered by ReefShark” shipments continue to increase and product cost reductions are proceeding well. “We also announced some leading new solutions in the quarter, including a unique approach to dynamic spectrum sharing that is in test mode with select major customers today, and is expected to be available in volume over the summer, in line with the availability of DSS-capable mobile devices,” he pointed out. “On the services side, ongoing execution improvements drove improved year-on-year profitability.”
Suri explained that the company’s enhanced its total cash position to €6.3bn, ($6.8bn) while net cash showed an expected seasonal decline to €1.3bn ($1.4bn). “These improvements are, of course, coming at a time of unprecedented change, given the impact of COVID-19. Our top focus areas are protecting our employees, maintaining critical network infrastructure for customers, and ensuring we have a strong cash position,” he said.
According to Suri, in Q1, Nokia saw a top line impact from COVID-19 issues of approximately €200m ($217.5m), largely the result of supply issues associated with disruptions in China.
He pointed out the the company is adjusting the mid-points within its previously disclosed outlook ranges for full-year 2020 to reflect the increased risks and uncertainty presented by the ongoing COVID-19 situation. “We expect the majority of this COVID-19 impact to be in Q2 and believe that our industry is fairly resilient to the crisis, although not immune,” he noted, adding that Nokia did not see a decline in demand in the first quarter.
Suri added that as the COVID-19 situation develops, however, an increase in supply and delivery challenges in a number of countries is possible and some customers may reassess their spending plans.
“Despite the majority of our R&D employees working from home, we have not seen any impact on our roadmaps, and, in fact, some key software releases are proceeding ahead of schedule. Nokia’s vision of creating the technology to connect the world has never been more important than today,” he said. “I want to thank our employees for their incredible resilience, ongoing support for each other whilst working from home, and their commitment to continued delivery of critical networks during this time. Equally, I want to thank our customers, suppliers, communities and the entire Nokia extended ‘family’ for their ongoing support.”
