Nokia Corp (ADR) (NYSE:NOK) released its first quarter earnings report overnight on Monday night, posting net losses of €513 million ($583.5 million), against last year’s €177 million in profits. Excluding expenses related to the Alcatel-Lucent deal, net profits were €139 million. Sales came in at €5.6 billion, an increase from last year’s €3.2 billion. Analysts had been expecting net profits of €237 million and €5.73 billion in sales.
Nokia struggles amid low demand
Mobile broadband equipment demand has been declining as the rollouts of the most recent generation of network equipment in China and other markets slows. The company’s revenue decline also comes despite the Alcatel-Lucent acquisition, which should have boosted sales. The quarter that was reported overnight was the first in which the results include the combination of Nokia and Alcatel-Lucent in one. The Finnish mobile network equipment maker completed its $16.6 billion acquisition of the company in January.
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The Networks business recorded an 8% decline in revenues, mostly because Ultra Broadband Networks recorded a 12% decline. North American operations recorded a 17% decline, bringing revenues in Nokia’s biggest market to €1.58 billion. Europe is the company’s second largest market, and sales there fell 3% to €1.2 billion. Latin American revenues grew 6% year over year.
Revenues from the Nokia Technologies patent licensing segment plunged 27% year over year to €198 million.
Nokia in transition
Nokia CEO Rajeev Suri said this year is a transitional one for the company and also expressed disappointment in the revenue decline. He also warned that the mobile networks climate is still “challenging” and that earnings will likely decline even more in the current quarter.
Suri told analysts on the company’s earnings call that Nokia and Alcatel-Lucent are spending on “extensive improvement activities” in the wake of the merger and that most of that spending will come in the first half of the year. He added that they have begun the last round of job cuts they had announced previously but warned that they could cut even more jobs globally, although he didn’t give analysts any idea of how many jobs might be cut.
According to the Associated Press, Pohjola Bank analysts called the company’s earnings results mixed with good profitability and gross margins but a poor outlook. Further, the ongoing integration of Alcatel-Lucent makes it more difficult to predict what lies ahead for the struggling company.
Nokia shares plunged 7.54% to $5.27 during regular trading hours on Tuesday at the New York Stock Exchange.