Nokia CEO says end-to-end deals at all-time high
As he previously signaled, Nokia CEO Rajeev Suri this week said the network infrastructure vendor had a challenging first half of the year but expects a “more robust second half.” In a Q2 2018 earnings call, Suri highlighted that some 40% of the company’s sales pipeline consists of “end-to-end deals…That is the highest level we have seen to date.”
On a constant currency basis, net sales were down 1% year-over-year to about $6.2 billion. Specific to the Nokia Networks business group, net sales were flat year-over-year at approximately $5.5 billion. Suri reported an operating margin in the networks business of a “disappointing” 1.5%. “We have been open for some time about the fact that 2018 would be a year of margin pressure.” But, the executive noted a “clear path” to better performance in 2019 and 2020 “as the 5G super-cycle takes hold.”
Suri described competitive intensity as “constant” but called “some aggressive cases in the quest for 5G footprint, but nothing unusual.” He said operators aggressively pursuing 5G profit share are fighting for cost concessions, although Nokia is able to find offsets. Suri said the vendor has won network footprint in some new areas and emphasized the importance of cost controls as “It will take some time to catch up given the speed of these changes.”
Suri also called out supply issues as causing a drag on income, and said this could continue to impact financials. He said common supply for components such as capacitors, diodes and transistors is strained. “The root cause of this situation is the fast growth of digital technologies in areas such as automotive, as well as supplier consolidation delaying capacity investments. While our procurement team is doing a good job of managing the situation, there is a risk that ongoing shortages could limit our ability to capture upside from un-forecasted demand.”
For a look at detailed Q2 financial information, click here. To hear an audio recording of the earnings call, click here.
