Nokia stock falls 7 percent after vague long-term profit outlook

Tue May 10, 2016 2:14pm EDT
 
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By Jussi Rosendahl and Eric Auchard

HELSINKI/FRANKFURT (Reuters) - Nokia's (NOKIA.HE: Quote) sales of network traffic equipment fell more than expected in the first quarter and will decline this year, the Finnish company said, as buyers hold off orders while it merges operations with recently purchased rival Alcatel Lucent.

However, it was the company's refusal to detail how it planned to shore up falling profits in the longer run that led Nokia shares to fall sharply in late afternoon trading, closing down 7.2 percent at 4.65 euros in Helsinki.

For the full year, Nokia forecast falling network sales and an operating margin of more than 7 percent, compared with 6.5 percent in the first quarter and analysts' average estimate of 9.4 percent. Analysts expect the margin to rise to 11.6 percent by 2018, once cost cuts from the merger have been completed.

Chief Financial Officer Timo Ihamuotila told investors on a conference call that the 7 percent target should be seen as a "floor" on which Nokia could improve during 2016. But he warned analysts not to use the figure to project future earnings.

The Nokia executive said forecasting was difficult just four months into its merger with Alcatel Lucent: "We don't have quite the visibility I would like to have," he said.

Nordea analyst Sami Sarkamies said the company had given analysts precious little to work with in terms of forecasting when stronger profits might return. "The margin estimates will be revised down clearly for this and next year,” he said.

WEAK MARKETS, MERGER DISTRACTIONS   Continued...

 
The Nokia headquarters is seen in Espoo, Finland April 6, 2016.  REUTERS/Antti Aimo-Koivisto/Lehtikuva/File Photo