Nokia held its annual general meeting at Messukeskus, a convention centre in Helsinki, on 16 June, 2016.
Nokia held its annual general meeting at Messukeskus, a convention centre in Helsinki, on 16 June, 2016.

Both analysts and investors have expressed their disappointment with the second-quarter performance of Nokia.

The result published by the network equipment manufacturer last week is an indication of problems underlying the entire wireless network industry, estimates Bengt Nordström, the chief executive of Northstream. Nor is a turn for the better on the horizon, he adds in an interview with Tidningarnas Telegrambyrå (TT), a news agency based in Stockholm.

“Nokia's poor result is further confirmation of the deep crisis of network suppliers. Additional cost-cutting programmes are to be expected,” he says.

Nokia reported on Thursday that its net sales fell by 11 per cent year-on-year to 5,676 million euros and its operating profits by as much as 49 per cent to 332 million euros in the second quarter of the year. The network equipment manufacturer said it will consequently accelerate its streamlining programme and raise its cost-cutting target from 900 million to 1,200 million euros.

Even that, however, will not be enough, estimates Nordström.

“All network suppliers must reach an entirely new, low level of costs if they intend to survive. I see no signs of future growth in the market. It's very hard to see how you could get a good result in the industry. All of this will translate to more rationalising measures and staff reductions. It's no longer enough to cut costs and hope that growth will re-start soon. Suppliers will have to dig deeper than that,” he says.

Rajeev Suri, the chief executive of Nokia, admits that conditions in the market remain challenging.

“The decline in our top line remains a concern and reflects challenging market conditions. While we do not expect those conditions to improve in the near term, we believe we are well-positioned given the scope of our portfolio, focus on operational discipline, strengthening sales execution and opportunities in the evolution from 4G towards 5G,” he says in the interim report.

Analysts at Inderes regardless estimate that this is a bad time to be holding shares in Nokia.

“The share is valued relatively high, while the outlook for market recovery remains weak. Better times to buy will probably come up later, once the outlook for the company's operations brightens,” they tweeted on Friday.

Aleksi Teivainen – HT
Photo: Antti Aimo-Koivisto – Lehtikuva
Source: Uusi Suomi