Nokia upbeat about 2022 after topping last year's guidance

Finnish kit vendor Nokia said on Tuesday it expects to exceed last year’s margin target, and has high hopes for 2022.

Based on preliminary results, the company said it expects to report an operating margin of 12.4-12.6% for full-year 2021, comfortably beating its previous guidance of 10-12%.

Explaining what happened, the company said in a statement that its underlying business performed as expected, but “other operating income was higher than expected including further benefits from venture fund investments, leading to a stronger comparable operating margin exceeding 2021 guidance.”

Nokia expects the situation to improve further in 2022, providing operating margin guidance of 11-13.5 percent. “This new guidance considers estimated continued improvements in the underlying business, supply constraints and cost inflation, with the year-on-year progression also impacted by the significant one-offs seen in 2021,” the company said.

A Nokia spokesperson clarified to Telecoms.com that the improvements refer only to the underlying business, not any of the other factors, which are still very much expected to be headwinds.

Even though the range-topping performance is not directly attributable to the earnings from network equipment sales, it is nonetheless a good indicator of Nokia’s general health. Indeed, a look back through its recent full-year financials shows the company is heading back in the right direction under the structure introduced by CEO Pekka Lundmark, who took over in September 2020. In 2019, before he succeeded Rajeev Suri, Nokia’s full-year operating margin narrowed to 8.6 percent from 9.7 percent a year earlier. However, things started looking up again in 2020, as it increased back to 9.7 percent.

The picture got even rosier for Nokia last year. It raced out of the blocks, reporting a 9 percent year-on-year increase in first-quarter revenue thanks largely to the networks business. Back then, its full-year operating margin guidance was 7-10 percent. In July, Nokia informed the market ahead of publication of its Q2 numbers that it planned to update its outlook, and that full details would be included in its financial report. As expected, when it came out, it showed operating margin guidance had been raised to 10-12 percent.

Lundmark said at the time that the performance was testament to Nokia’s new operating model. Based around four core segments: Mobile Networks, Network Infrastructure, Cloud and Network Services, and Technologies (its intellectual property division), each one is responsible for its own P&L, and end-to-end product/service development and delivery. That operating model also included redundancies, including a slimmed-down senior management structure.

We’ll get a clearer view on Nokia’s current state when its Q4 and full-year figures are published on 3 February.