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    ERIC B   SE0000108656

ERICSSON

(ERIC B)
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Nokia makes small profit in face of supply disruption

04/30/2020 | 05:29am EDT
The logo of Nokia is seen before the company's news conference in Espoo

By Tarmo Virki and Supantha Mukherjee

Nokia Oyj eked out a small profit in the first quarter, backed by demand for its new high-margin 5G telecoms equipment, and predicted a strong second half of the year, sending its shares higher.

The Finnish company said the bulk of the coronavirus impact will be felt in the current quarter. Its revenue slipped 2% in the first three months of the year as it took a hit of about 200 million euros ($217 million) largely because the pandemic disrupted supply from operations in China.

Nokia, battling with China's Huawei and Sweden's Ericsson, is trying to strengthen its 5G slate and looking especially to deployment by U.S. telecom companies for growth.

Ericsson and Huawei both increased their revenue in the first quarter, helped by strong demand as telecom services help to keep businesses working remotely during the pandemic.

Nokia expects a seasonally strong second half when it will have new leadership as former executive Pekka Lundmark from energy group Fortum is due to replace Chief Executive Rajeev Suri in September.

It trimmed its full-year earnings forecast to 23 euro cents from 25 cents, but shares in the company were up by 2.7% by 0900 GMT.

China has been a weak spot for Nokia but CEO Suri said the company had won a 10% share of China Unicom's 5G core network order, with Huawei and ZTE taking most of the order.

"We are the only foreign supplier in China Unicom for 5G core," Suri told Reuters in an interview.

According to media reports, Nokia did not win any 5G radio contracts from Chinese telecom companies - China Mobile, China Unicom and China Telecom - in recent bidding rounds.

CHALLENGES

Nokia reported January-March revenues falling to 4.9 billion euros, missing the 5.1 billion euro consensus figure, according to Refinitiv data.

"We did not see a decline in demand in the first quarter. 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 re-assess their spending plans," Suri said in a statement.

Nokia generated first quarter underlying profit of 1 cent per share, broadly matching analysts' forecasts, according to Refinitiv data based on 10 analysts. It had posted a loss of 2 cents per share in the same period last year.

Nokia, which axed its dividend after a profit warning last October, has been trying to tackle costs and delays in shipments and pointed to progress for its new 5G ReefShark equipment.

"As was expected, new uncertainties have been added to the outlook due to the pandemic but solving the company's internal problems seems to progress on schedule," Inderes analyst Mikael Rautanen wrote in a note.

(Reporting by Tarmo Virki in Tallinn and Supantha Mukherjee in Bengaluru and Anne Kauranen in Helsinki; Editing by Raju Gopalakrishnan and Keith Weir)


ę Reuters 2020
Stocks mentioned in the article
ChangeLast1st jan.
CHINA MOBILE LIMITED 0.77% 52.45 End-of-day quote.12.07%
ERICSSON -0.01% 77.62 End-of-day quote.-22.22%
FORTUM OYJ 3.02% 17.725 End-of-day quote.-34.33%
NOKIA OYJ 0.52% 4.608 End-of-day quote.-17.33%
T-MOBILE US 0.13% 126.04 End-of-day quote.8.67%
ZTE CORPORATION 0.38% 23.78 End-of-day quote.-29.01%
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Sales 2022 253 B 25 439 M 25 439 M
Net income 2022 23 817 M 2 391 M 2 391 M
Net cash 2022 63 205 M 6 344 M 6 344 M
P/E ratio 2022 10,6x
Yield 2022 3,41%
Capitalization 260 B 26 112 M 26 112 M
EV / Sales 2022 0,78x
EV / Sales 2023 0,68x
Nbr of Employees 101 067
Free-Float 89,4%
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Number of Analysts 22
Last Close Price 77,62 SEK
Average target price 108,58 SEK
Spread / Average Target 39,9%
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Managers and Directors
Erik B÷rje Ekholm President, Chief Executive Officer & Director
Carl Mellander CFO, Senior VP & Head-Group Function Finance
Ronnie Leten Chairman
Erik Ekudden Chief Technology Officer & Senior Vice President
Nora M. Denzel Independent Director
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