Nokia reaps rewards of 5G demand but supply issues could have future impact

Nokia is reaping the rewards of global 5G deployments and its own internal changes after beating analyst expectations in the first quarter of 2022.

The Finnish networking giant saw sales rise by 5% to €5.35 billion, driven by demand for its 5G radio equipment, core platforms, and associated services.

This performance is all the more impressive given the supply chain issues and global component shortages that have persisted following the pandemic. Both could increase Nokia’s costs and force it to pass them onto customers.

Nokia results 

“Overall, Q1 was a strong start for the year both in terms of net sales and profitability,” declared Nokia CEO Pekka Lundmark. “The demand environment remains strong and while supply chain and inflation challenges remain, we are confident we can deliver our 2022 outlook and continue to make good progress towards our long-term targets."

“Network Infrastructure delivered again strong growth with continued robust momentum in both Fixed and Submarine Networks. In Mobile Networks supply constraints hindered our revenue growth, nevertheless we expect to return to growth this year due to our improved competitiveness. Our 5G Core business continued to drive good growth in Cloud and Network Services.”

Despite the revenue gains, profit did fall by 17% to €219 million, with Nokia’s balance sheet showing a €100 million charge relating to the company’s withdrawal from the Russian market after the invasion of Ukraine. Russia accounts for less than 2% of Nokia’s sales and the firm said it would not impact its outlook for 2022. 

According to more ‘comparable’ metrics, Nokia says profit would have increased apart from the charge, easing investor concerns.

“It has been clear for us since the early days of the invasion that continuing our presence in Russia would not be possible,” added Lundmark. “We announced in early April that we will exit the Russian market in a responsible way and aim to provide the necessary support to maintain our customers’ networks, as we exit.”

Lundmark has overhauled Nokia’s business since he was appointed in the summer of 2020, saying the company would do “whatever it takes” to win in 5G. The company is locked in a fiercely contested battle with other Network Equipment Providers (NEPs) such as Ericsson and Huawei. 

However, the company was surprised by the earlier-than-expected shift to 5G and has struggled with the high cost of developing 5G technologies.

An internal restructure and a focus on research and development have transformed the company’s fortunes and make it well-positioned to capitalise on anticipated growth in the 5G space.

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