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Nokia back in the black thanks to LTE in China and US

4G infrastructure deployment drove stronger profits for Nokia in the third quarter.
Written by Liam Tung, Contributing Writer

Nokia is upbeat about its networking business after reporting strong profit growth in its third quarter, driven by major LTE network deployments in the US and China.

Nokia is finally looking in better shape for investors, with the company reporting a non-IFRS operating profit of €457m in its third quarter, up 33 percent year on year. According to Reuters, analysts had expected an operating profit of €359m. 

Net sales meanwhile reached €3.32bn, up 13 percent year on year.

After shedding its handset business to Microsoft this April, Nokia was left with its Here mapping business, a technology and intellectual property group, and networks, its main revenue earner. The latter delivered non-IFRS operating profit of €397m for the quarter, up 83 percent from €217m a year ago.

Nokia's closely-watched profit margins on its network business also exceeded analysts' expectations of 9.9 percent, according to Reuters, reaching 13.5 percent for the quarter, up on last quarter's 11 percent.

Nokia attributed its improved position to major new LTE network deployments in North America and Greater China, having landed LTE network deals with T-Mobile in the US and China Mobile.

"Networks benefited from some unique developments in the quarter, with a business mix weighted towards Mobile Broadband and regional mix that included strong gains in North America," Rajeev Suri, Nokia's CEO, said in a statement.

The company also gave a brighter full year outlook for its network business, where it expects non-IFRS operating margin to be slightly above 11 percent compared to its previous range of five percent to 10 percent.

After reporting flat net sales growth on its Here mapping business last quarter, Nokia said it had achieved 12 percent year on year growth this quarter, with net sales of €236m. However, profit fell from €21m a year ago to zero for the third quarter of this year.

Nokia also recorded a €1.2bn impairment charge to operating profits related to Here based on its new estimate that the recoverable amount of Here is now €2bn. Nokia has recently bolstered Here with acquisitions of social and analytics focused companies including Medio and Desti. For the quarter, it sold map data licences for embedded navigation systems of 3.2 million new vehicles, slightly down on last quarter's figure of 3.3 million.

Suri said the company was "sharpening Here's strategy" for better balance growth and profitability with a focus especially on the automotive sector. The company also today announced its appointment of Sean Fernback as president of Here. The unit's former CEO, Michael Halberr abruptly this August after a few months in the role.

Nokia Technologies, the company's intellectual property unit, also clocked up a nine percent year on year rise in sales, from €140m to €153m, primarily off the back of licensing deals with Microsoft. Operating profit was up 17 percent to €98m.

Nokia ended the quarter with net cash of €5bn, down from €6.5bn last quarter, primarily due to paying out dividends during the quarter, a share repurchase, and acquisitions.

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