Home Stocks Nokia Corporation (ADR) (NOK) Swings To Profit But Disappoints

Nokia Corporation (ADR) (NOK) Swings To Profit But Disappoints

Nokia released the earnings results from its most recently completed quarter this morning, posting non-IFRS diluted profits of €0.05 per share on revenue of €3.2 billion, a 20% year over year increase. Analysts had been expecting earnings of €0.04 per share on €3 billion in revenue for the quarter.

Nokia’s Networks segment posts weak results

Nokia posted net losses of €0.06 per share or $239 million for the first quarter. Networks revenue increased 15% to €2.67 billion, beating the consensus estimate of €2.6 billion. However, the operating profit for the segment plunged 60% from €216 million last year to €85 million this year. The Networks business made up 80% of Nokia’s overall revenue.

CEO Rajeev Suri called the Network segment’s profitability “unsatisfactory,” saying it was the result of more sales of hardware, which has lower margins, rather than software, which has higher margins. The Network’s business, which was supposed to become Nokia’s core business, fell from 9.3% to 3.2%, greatly missing the long term target of 8% to 11%. Despite the Network business’ weak performance, Suri remained confident in the segment.

“I remain confident that our lean operating model, ongoing focus on cost management, and the current strength of our portfolio will enable us to meet our 2015 goals for Nokia Networks,” Suri said in a statement. “The business delivered healthy year-on-year growth even after adjusting for currency fluctuations, although a number of factors in the quarter had a negative impact on profitability. We expect some of these negative factors to ease, particularly in the second half of 2015.”

Nokia’s Technologies segment sees strong results

Nokia managed to beat consensus estimates for its overall earnings because of its Technologies division, which posted sales of €193 million. Operating profits for the segment increased from €83 million to €192 million. Analysts had been expecting €159 million in Technologies revenue.

The company’s HERE maps business reported sales of €261 million, compared to €209 million last year. The consensus estimate for HERE revenue was €241 million. Operating profits for the segment increased from a €3 million loss to profits of €11 million for the quarter. Nokia has said it might sell the HERE segment, which is valued at €2 billion but could bring in €1 billion to €7 billion for Nokia if it sold the business.