Nokia Reports a Challenging Q1

Nokia reported Q1 2016 net sales (non-IFRS) of EUR 5.6 billion, down from EUR 6.1 billion on a comparable combined company basis from a year earlier.

Rajeev Suri, President and CEO of Nokia, stated:  “I am pleased that we were able to deliver solid profitability in what is typically a seasonally weak quarter and at a time when the risk of integration-related disruption was high. While our revenue decline was disappointing, the shortfall was largely driven by Mobile Networks, where the challenging environment is not a surprise. We noted in our Q4 2015 earnings release that we expected some market headwinds in 2016 in the wireless sector and we continue to hold that view today.”

“While integrations of the scale of Alcatel-Lucent are complex and take time, we are now sufficiently confident in our progress that we are targeting synergies that are both more than and faster than our original plan. We already have agreed transition plans that cover the most pressing areas of portfolio overlap with most of our top customers; have begun the process of reducing over-lapping personnel including initial reductions in the United States and several other countries; started to consolidate our real estate footprint with several sites already closed and thirty more scheduled for the current quarter; and completed 40 projects with suppliers to drive procurement savings, with 200 more projects currently underway and plans for hundreds of additional projects to be launched largely over the course of Q2 2016.”

Some highlights:

• Nokia’s Networks business experienced an 8% year-on-year net sales decrease in Q1 2016. Sales for Ultra Broadband Networks declined 12% year-on-year and 27% sequentially. IP Networks and Applications grew on a year-on-year basis.
• Strong non-IFRS gross margin of 38.3% in Q1 2016 primarily due to improved product mix in Ultra Broadband Networks (led by Mobile Networks) and IP Networks and Applications (led by IP/Optical Networks), as well as efficiency gains.
• Non-IFRS operating margin of 6.5% in Q1 2016. The year-on-year increase of 2.8 percentage points was primarily due to the higher non-IFRS gross margin, as well as continued focus on execution excellence.

http://company.nokia.com/en/news/press-releases/2016/05/10/nokia-corporation-interim-report-for-q1-2016

Investor presentation is here:

http://company.nokia.com/sites/default/files/download/investors/nokia_q1_2016_slides.pdf