We're not Finnished yet: Nokia chalks up €200m sales hit to 'COVID-19 issues'

Insists: It was the supply chain! We'll get the sales back later this year


Nokia Oyj told the market this morning that it estimates the novel coronavirus has "had an approximately €200m negative impact" on its Q1 2020 sales, mostly due to "supply chain challenges" but insisted the sales would be "shifted to future periods", rather than being lost to the ledger entirely.

Nonetheless, Nokia managed to cut its losses for the most recent quarter [PDF] despite the disruption (and subsequent economic slump) caused by the coronavirus pandemic.

Losses were down to €76m, compared to a €524m in Q1 2019, while revenues shrank slightly from €5bn a year ago to roughly €4.9bn in the quarter ending 31 March.

The firm's quarterly report claimed some silver linings, the most notable being the Nokia Software business unit. This cormer of the company grew 13 per cent to €613m from Q1 2019's €543m.

However, other components of the business struggled, including Networks, which represents the lion's share of Nokia's revenue. That slumped 6 per cent, from roughly €5bn to just over €4bn. The Technologies business unit, which includes revenue from patent licensing, also took a bit of a beating, with sales slumping by 7 percent from €370m to €347m.

Nokia attributes its first-quarter woes to supply chain disruption caused by the lockdown in China. Despite that, it is confident they'll be short-lived, with its situation stabilising by the second half of the year, and year-wide margins expected to reach 9 per cent.

The Finnish comms giant also adjusted its earnings per share guidance downwards for the coming year, adding that it "expect[ed] the majority of this COVID-19 impact to be in Q2".

In a statement, Nokia CEO Rajeev Suri cited the company's "resilient customer base" and "strong liquidity position", as well as expectations that the business will be able to flog more of high-margin 5G kit in the coming months as network upgrades accelerate.

By the end of 2020, Nokia estimates that the "5G Powered By Reefshark" portfolio will account for 35 per cent of its network sales, reaching 70 per cent in 2021, and 100 per cent the following year. It also hopes to have a 27 per cent share of the global 5G infrastructure market (excluding China) by the end of the year.

And even in the Middle Kingdom, there's room for optimism as Nokia said it had signed a deal with China Unicom to use its equipment alongside infrastructure from arch-rivals ZTE and Huawei.

This is a big deal on two counts: firstly, because China Unicom has the fourth-largest subscriber base of any mobile carrier in the world but also because Nokia will be providing 5G core equipment, rather than less sophisticated (and cheaper) RAN gear.

Earlier this morning, Nokia boasted that it was the sole foreign vendor in China Unicom for 5G core.

Swedish rival Ericsson, meanwhile, announced a RAN and core contract win for China Mobile today. ®


Biting the hand that feeds IT © 1998–2020