Nokia expects a second year of declining revenues with the telecommunications equipment maker warning of a difficult 2021, as it struggles to assert itself in the 5G market against rivals Huawei and Ericsson.
The Finnish group said on Thursday that it expects sales this year to be € 20.6 billion to € 21.8 billion compared to € 21.9 billion in 2020 and warned that it would suffer a “significant decline” in its main mobile network business due to strong competition in NOS.
“We expect 2021 to be challenging, a year of transition, with significant headwinds due to the loss of market share and price erosion in North America,” said Pekka Lundmark, Nokia’s chief executive since August.
He told the Financial Times that the group was “willing to sacrifice some of its profitability” to try to regain leadership in 5G technology by increasing its R&D spending while seeking to recover the lost ground for China’s Huawei and Sweden’s Ericsson.
Nokia was taken aback by the early start of sales of 5G networks, as it was still digesting the € 15.6 billion acquisition of Alcatel-Lucent. She replaced her chief executive and president last year amid questions about why she was unable to capitalize on the U.S.-led campaign against Huawei.
Fourth-quarter sales and profits fell, but less than expected by analysts. Revenue fell 5 percent to € 6.57 billion against a consensus forecast of € 6.42 billion, according to data from Refinitiv, while basic earnings per share were € 0.14, down from € 0.15 a year earlier, but above analysts’ estimate of € 0.11.
Nokia said it expects its comparable operating margin to be 7 to 10 percent compared to 9.7 percent in 2020. It will not pay dividends for 2020, but will assess at the end of the year whether it will pay one for 2021 leading taking into account its net cash position and prospects for 2022.
Lundmark promised to “invest whatever it takes to win in 5G”, a sign of how Nokia is taking the fight seriously. But it expects its 5G market share this year outside China – where it has struggled to close deals, unlike Ericsson – to be 25 to 27 percent, down from 27 to 28 percent in 2020. “This will be a year that we are redefining the baseline, getting the right technology, ”he added.
Nokia shares have risen more than a fifth this year. It was one of the actions driven by amateur Reddit traders, but fell 14% from last week’s recent high.
Lundmark said that, unlike other actions targeted by Reddit brokers, Nokia did not have a significant number of short sellers betting against it, and added that the company was ready to help regulators who wanted to examine market upheavals.