Nokia says it has been planning for a new market reality
Nokia laid out its long-term strategy in a business update today that came in the wake of AT&T choosing Ericsson as the foundational vendor in its shift toward open networks. Investors responded by sending the network equipment vendor’s stock up nearly 3% in midday trading.
Nokia lowered its guidance for operating margin from 14% to at least 13% by 2026 due to challenges in the 5G market—including the overall market slow-down in 5G investment, but the AT&T-Ericsson deal loomed large as well.
AT&T accounted for 5-8% of Nokia’s Mobile Networks net sales to this point in 2023, and as a result of the Ericsson Open RAN deal, Nokia said that it now expects mobile network revenues from AT&T to decrease over the next 2-3 years—though it will still be selling network infrastructure, cloud and network services to AT&T, such as microwave radio links, femtocells and so on. “Nokia expects Mobile Networks to remain profitable over the coming years but this decision would delay the timeline of achieving double digit operating margin by up to 2 years,” the company added.
The update from Nokia came amid a number of notable announcements in the past few days: By 2028, Nokia will move the longtime headquarters of its vaunted Nokia Bell Labs research and development organization, saying that the move from Murray Hill, NJ to a new, state-of-the-art facility that will break ground in 2025 in New Brunswick, NJ will help the organization to “adapt and evolve to remain at the forefront of cutting-edge technology.” Nokia is also beginning a multi-vendor Open RAN network deployment in Deutsche Telekom’s network, working with Fujitsu in a move that the NEM called a “significant return for Nokia into Deutsche Telekom’s network.”
Nokia also announced today that it is acquiring defense contractor Fenix Group from Enlightenment Capital, in order to bolster its tactical communications and defense-related solutions portfolio.
On the update today, executives emphasized the company’s strength in an enterprise ecosystem for private networks and third-party applications that it can monetize; its focus on cost-cutting by the end of 2025; and better utilizing digital tools for productivity, including trialing the use of GenAI in its R&D organization.
Nokia also emphasized its increasing market share outside of China, and its investments in R&D. “Nokia remains one of the few global vendors of mobile network equipment with significant scale and R&D investment capability to deliver market leading products to customers and while the company is taking action to lower its cost-base, it will protect its R&D output,” the company said.
“Whilst the news from AT&T is disappointing, our Mobile Networks business has made significant progress in recent years, increasing our RAN market share and technology leadership. I firmly believe we have the right strategy to create value for our shareholders into the future with opportunities to gain share, diversify our business and improve our profitability,” said Pekka Lundmark, Nokia’s president and CEO. “Mobile Networks are critical to our global connected future and as I have said before, the cloud computing and AI revolutions will not materialize without significant investments in networks that have vastly improved capabilities. Our customers can rest assured that we continue to invest in R&D and develop market-leading products for them.”
