Driven by strength in its patent licensing business and improve efficiency in its Networks division, but offset by some challenges in its Mobile Networks business, Nokia reported Q3 2017 net sales of EUR 5.5 billion, a 7% year-on-year decrease (4% decrease on a constant currency basis) compared to a year earlier.
Gross margin for Q3 was 42.7% (40.0% in Q3 2016), and non-IFRS operating margin ws 12.1% (9.3% in Q3 2016), driven by Nokia Technologies and resilience in Nokia’s Networks business.
Nokia’s Networks business
- 9% year-on-year net sales decrease (6% decrease on a constant currency basis) in Q3 2017, primarily due to Ultra Broadband Networks, reflecting challenges related to market conditions and certain projects in Mobile Networks, primarily in North America and Greater China.
- In Q3 2017, on a constant currency basis, the year-on-year net sales performance in IP Networks and Applications and Global Services improved, when compared to the year-on-year performance in Q2 2017. On a constant currency basis, year-on-year net sales grew by 2% in both Global Services and IP Routing.
- Gross margin was 38.6% supported by continued operational discipline. Operating margin of 6.9% reflected weak results in Ultra Broadband Networks, which was partially offset by improved year-on-year performance in Global Services and IP Networks and Applications.
Nokia Technologies
- 37% year-on-year net sales increase and 73% year-on-year operating profit increase in Q3 2017, primarily related to a settled arbitration in the third quarter 2017.
- Approximately EUR 180 million of the net sales were non-recurring in nature and related to catch-up net sales for prior periods.
- approximately doubled recurring license revenue from EUR 578 million in 2014.
Rajeev Suri, Nokia’s President and CEO, stated: “Despite the progress we made in the quarter, we experienced some challenges in our Mobile Networks business and see a continued decline in our primary addressable market in 2018. That decline, which we estimate to be in the range of 2% to 5%, is the result of the multiple technology transitions underway; robust competition in China; and near-term headwinds from potential operator consolidation in a handful of countries.”