Nokia hit by weak wireless market, says awaiting merger benefits

Thu Oct 27, 2016 10:17am EDT
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By Jussi Rosendahl and Tuomas Forsell

HELSINKI (Reuters) - Finnish telecoms equipment group Nokia (NOKIA.HE: Quote) reported a sharp drop in third-quarter earnings on Thursday, suffering from weaker sales in the wireless network market and warning that the market was likely to shrink further in the coming year.

Its share price fell 7 percent on the news to its lowest level in three years, despite analysts saying that Nokia is now better placed than Ericsson (ERICb.ST: Quote) to ride out the downturn in the mobile network market following its acquisition in January of broader-based rival Alcatel-Lucent.

Ericsson earlier this month reported a more than 90 percent plunge in third-quarter profits and replaced its chief executive.

The wireless network market is in decline after demand for 4G mobile broadband equipment peaked last year and a new cycle of network upgrades to the still evolving 5G standard is not expected to begin until around 2020.

So far Nokia is seeing scant benefit from the purchase of Alcatel-Lucent, bought in a 15.6 billion-euro ($17 billion) all-share deal, though the company said its integration was proceeding to plan.

Nokia's third-quarter network sales fell 12 percent from a year ago to 5.32 billion euros against an average expectation of 5.39 billion, with revenue declining in all geographic regions.

"It's a bit better than Ericsson's, but it is not a good report ... In the near term, Nokia will have tough time ahead," said Swedbank analyst Mathias Lundberg, who rates the stock "neutral".

"But given time, and with a successful integration of Alcatel Lucent, Nokia could be a very forceful company."   Continued...

A photo illustration of a man silhouetted against a Nokia logo in the central Bosnian town of Zenica January 23, 2014.      REUTERS/Dado Ruvic/File Photo