Home & Office

HERE's the good news: Maps a bright spot for Nokia as networks profit slides

While sales are up across the board at Nokia, profit has taken a tumble in its Networks division.
Written by Jo Best, Contributor

Nokia's sales are on the up, with all three of its units showing revenue growth during the first quarter of the year.

Nokia published its first quarter results on Thursday, showing revenue increasing 20 percent year on year to €3.2bn, up from €2.7bn a year ago. However, operating profit took a tumble, falling from €305m a year ago to €265m for the most recent quarter.

The biggest reduction in profit came from Nokia's Networks division, falling 61 percent to €85m, despite a 15 percent rise in revenue to €2.7bn.

The company said that it is seeing growth in Networks' global services business, particularly around network implementation, but attributed a drop in profit from its mobile broadband business to climbing operating costs, a decrease in income from its core networking technologies software, and "challenging market conditions" after sales fell in Europe and Latin America. It also highlighted that R&D costs for Networks grew "primarily due to increased investments in LTE, 5G and cloud core".

"I remain confident that our lean operating model, ongoing focus on cost management, and the current strength of our portfolio will enable us to meet our 2015 goals for Nokia Networks. The business delivered healthy year-on-year growth even after adjusting for currency fluctuations, although a number of factors in the quarter had a negative impact on profitability. We expect some of these negative factors to ease, particularly in the second half of 2015," Nokia CEO Rajeev Suri said in a statement.

Nokia is looking to bolster its Networks operations with a €15.6bn takeover of Alcatel-Lucent, announced earlier this month. The deal, which will help the company better compete with Huawei and Ericssion, has drawn fire from Alcatel-Lucent shareholders, who believe it undervalues the company.

"The strategic logic of this proposed transaction is strong and we believe that it will provide long-term benefits to shareholders of both Nokia and Alcatel-Lucent. We are moving fast on the necessary integration planning, and have already established a structure designed to minimize disruption to our ongoing business," Suri added.

Here and Technologies

Nokia's mapping unit Here saw both revenue and profit growing during the first quarter: the former jumped 25 percent year on year to €261m and the latter 20 percent to €162m. The healthier bottom line came thanks to more licences being sold to automotive manufacturers - 3.6 million during the quarter - as well as "Microsoft becoming a more significant licensee of Here's services".

Improvements in Here's bottom line come at a time of uncertainty for the mapping division's future. Earlier this month, Nokia announced a strategic review of Here as it looks to offload the unit. Since then, a number of companies have been linked with a possible acquisition of the division, including Uber and a collective of German automakers.

Nokia's third unit, its licensing and R&D unit Technologies, has also see growth for the first quarter of 2015. Both revenue and profit more than doubled year on year to €266m and €193m respectively, thanks in part to the company extracting more money from existing IP licensees including Microsoft.

Read more

Editorial standards