Nokia profit up, new CEO pledges to boost 5G investments

Telecom equipment maker Nokia has reported improved third-quarter earnings largely in line with expectations. But it acknowledges it faced challenges in the race for new generation 5G networks and pledged to invest more. PHOTO CREDIT: Seth Wenig

HELSINKI — Finnish telecommunications company Nokia today reported improved third-quarter earnings largely in line with expectations, but acknowledged it faced challenges in the race for 5G cellular networks.

Nokia said it would invest more in the new generation of broadband technology and revamp business strategy under its new CEO, who said the company would do “whatever it takes” to achieve 5G leadership.

The company based in Espoo, Finland, reported that net profit for the July-September period was up 14% to 305 million euros ($358 million). Sales were down 7% to 5.3 billion euros.

The quarterly report was the first one issued since CEO Pekka Lundmark took over the company’s top spot on Aug. 1.

He said today that “more change is needed” within Nokia, which has played catch-up with China’s Huawei and Sweden’s Ericsson in the 5G market. Last week, Ericsson reported upbeat third-quarter earnings that were helped by the rollout of 5G networks in China and a strong U.S. market.

“Our financial performance in 2021 is expected to be challenging,” Lundmark said. “We have lost share at one large North American customer, see some margin pressure in that market, and believe we need to further increase R&D investments to ensure leadership in 5G. In fact, we have decided that we will invest whatever it takes to win in 5G.”

Nokia said today it has secured 101 commercial 5G deals with 36 live networks, while Ericsson, respectively, said last week it had 112 commercial 5G agreements with 65 live networks. The Nordic duo is trailing 5G global market leader Huawei.

In a call with reporters, Lundmark said Nokia was “well placed” to take advantage of bans imposed on some network equipment vendors, clearly pointing to Huawei and some other Chinese companies without naming them.

“Some of the geopolitical trends are opening up new opportunities,” Lundmark said in the call. “We understand that the safety and security of the network and the trustworthiness of the vendor is extremely important. It’s going to be increasingly important in the future.”

Huawei has been banned by several governments from 5G networks over allegations it can allow the Chinese government to snoop on data. Huawei has denied the allegations. Sweden became latest European country last week to ban Huawei and ZTE, another Chinese network equipment provider, from its 5G networks.

Nokia also announced a new strategy, effective Jan. 1, where it will have four business groups consisting of mobile networks, fixed networks, cloud and network services, and the Nokia Technologies unit. Lundmark said Nokia would share details of the new strategy in December.