Nokia continues to feel heat after 11% Q2 revenue dip

Nokia CEO Rajeev Suri has cited challenging market conditions and the ongoing Alcatel-Lucent integration as reasons for declining revenues in Q2 2016.

The Finnish kit vendor, which acquired Alcatel-Lucent for $15.6 billion last year, posted net sales of €5.7 billion for the last quarter, an 11% decline Year on Year considering historical results of the two companies combined. That percentage decline could be slightly misleading considering Nokia’s recent cost-cutting exercises to remove overlapping products, services and teams from its portfolios; so while the numbers look bad on the face of things the reality is that the combined entity’s numbers would never quite reach the heights each company saw individually prior to the merge.

On the whole, its Networks business also saw an 11% decline which CEO Rajeev Suri puts down to particularly challenging market conditions. Suri gave advanced warning of a challenging 2016 back in quarterly announcements last year, so while the numbers are down Nokia did over deliver on its projected forecasted sales.

“Nokia’s second quarter results were largely as expected and reflect solid execution in the midst of a challenging market and the ongoing integration of Alcatel-Lucent,” said Suri. “When we announced our first quarter results, I said that we did not expect to see typical seasonal patterns in the first half of the year, and that prediction proved to be correct.

“The decline of our topline remains a concern, and reflects challenging market conditions. While we do not expect those conditions to improve in the near term, we believe we are well-positioned given the scope of our portfolio, focus on operational discipline, strengthening sales execution, and opportunities in the evolution from 4G towards 5G.”

Suri went on to emphasise how important 5G will be to Nokia, and how the vendor needs to harness the opportunity early on to make sure it keeps itself relevant in the next generation of wireless technology.

“In fact, we are already starting to work with customers to help them move to 5G-ready architectures in the core, with a focus on software-defined networking and cloud technologies,” he said. “As this process takes place, we expect there to be further evolution of 4G radio including more carrier aggregation in order to meet demands for capacity, speed and spectrum utilization. Our AirScale radio platform, which can support different LTE-Advanced Pro (4.5G) technologies and is ‘5G ready,’ is ideally suited to this environment.”

Nokia’s not the only major vendor feeling the heat at the moment, following the resignation of Ericsson CEO Hans Vestberg last week amid sustained market pressure and declining fortunes. The majority of pressure for the two Scandinavian vendors comes from the Far East, with Huawei continuing to grow market share and assert some dominance over its rivals.