13 November 2018
Telecom giant Nokia has launched a new cost-cutting programme and stated that operators' demand for next-generation 5G networks would increase for the remainder of the year. The networks industry has been facing slowdown due to decreased demand for existing 4G networks as well as investor doubts over whether 5G contracts can begin to boost profitability in the current year.
The company has reported a drop in quarterly profit and stated that it was targeting annual cost savings of 700 million euros (US$799 million approx.) by the end of 2020. Nokia has not revealed whether it will be cutting jobs. The firm is yet to complete its previous 1.2-billion-euro cost cuts, that were announced after its 2016 acquisition of Franco-American Alcatel-Lucent.
Nokia's operating profit in Q3 fell 27% from a year ago to 487 million euros which are in line with analysts' forecast. Chief Executive Rajeev Suri stated that Nokia's networks business plans to deliver a full-year operating margin of 6-9%.
"We are making progress but still have more work to do get our network margins where we would like them to be," Chief Executive Rajeev Suri told a conference call.
"Despite some risks related to short-term delays in project timing and product deliveries, we remain on track to deliver on our full-year guidance," he added.
"Networks business sales are growing, which indicates that the market is picking up... I believe Q4 will be very strong," said Mikael Rautanen, an analyst at Inderes Equity Research, which has an "accumulate" rating on the stock. "But there is a small risk of a profit warning for the remainder of the year."