Nokia reports robust profitability in third quarter 2021, surpasses analyst prediction

Nokia Cloud & Network Services increased by 12%. Sales growth in network infrastructure pushed 6% on y-o-y constant currency basis
Comparable gross margin was 40.8% and echoing continuous strong execution. Positive cost competitiveness with 220 bps y-o-y increase in Mobile Networks whose comparable gross margin was 37.8%

Wireless and fixed network equipment maker Nokia on Thursday reported third-quarter profit above analyst expectations on increasing sales of 5G technology and trimmed costs, but the company warned that the global shortage of semiconductors made the market outlook foggy and could hamper growth.

The Espoo, Finland-based company reported net profit of 463 million euros ($537 million) for the July-September period in comparison to 305 million euros a year earlier. Sales were up 2% at 5.4 billion euros.

CEO Pekka Lundmark said the third-quarter results showed the company delivered another great quarter driven by its increased investments in 5G technology.

He noted that the uncertainty around semiconductors limited the outlook for the fourth quarter and into 2022. The shortage of semiconductors has led to a shortage of chips for the products of Nokia and its competitors.

We could’ve grown faster (in the third quarter) had there been enough components available, Lundmark said in a conference call with reporters, adding that Nokia was working closely with its suppliers and customers to solve the semiconductor availability problem.

The executive has vowed to make Nokia the world leader in 5G – the new generation of broadband technology – even if it means sacrificing short-term profitability. In 5G technology, Nokia is in a tight race with Nordic competitor Ericsson, China’s Huawei and South Korea’s Samsung, among others.

Despite a booming market for 5G products, Lundmark earlier this year acknowledged that Nokia faced problems in certain markets like the United States, where the company has lost market share. Its penetration of the China market also remained low despite Nokia securing an important 5G deal with key operator China Mobile this year.

Sales for Nokia’s fixed networks unit grew 30%, to 588 million euros, quarter-on quarter.

Looking ahead, Nokia feels it is well positioned to capitalize on strong demand robust technology leadership and enhanced cost competitiveness.
However, the company is uncertain around the global semiconductor market, which poses limitations to its Q4 and 2022 visibility. Nokia maintains its expectation improved performance in Nokia Technologies’ comparable operating profit in 2020, and longer-term performance stability.

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