Nokia Vows More Cost Cuts After Profit Drop

Nokia Corp. reported a 45% fall in second-quarter profit that fell short of market expectations and vowed to step up costs cuts after its recent acquisition of rival French telecoms-equipment supplier Alcatel-Lucent SA.

The Finnish telecom-equipment maker said on Thursday that profit shrank to €194 million ($215.3 million) in the three months to end-June compared with €355 million profit in the year-earlier period as a stand-alone company.

Revenue, while up sharply at €5.68 billion on the Alcatel deal from €2.92 billion reported in the same period last year, fell 11% when compared with the €6.36 billion in combined revenue Nokia and Alcatel-Lucent reported in the second quarter last year.

Nokia said the second-quarter figures weren't prepared according to international accounting standards, known as IFRS, in excluding costs related to the Alcatel acquisition in addition to a range of other items that weren't necessarily indicative of Nokia's underlying performance.

The decline in sales was largely due to a weak quarter in mobile networks, Nokia said. The Finnish company's sluggish three months mirrors a sector-wide trend of slowing demand and increased competition in wireless telecom gear

In recent months, the industry has been severely hit by slower demand for network upgrades from telecom carriers in established markets, as many of them last year completed the rollout of new-generation wireless networks, while service providers in emerging markets face faltering economic growth.

At the same time, Nokia is facing stiff competition from Chinese companies Huawei Technologies Co. and ZTE Corp., two players which have gained significant market shares in a few years' time by offering innovative products at competitive prices.

Nokia said it is now targeting €1.2 billion in annual cost savings by 2018, compared with €900 million it had announced before.

Analysts, according to a poll by data provider FactSet, had estimated Nokia's second-quarter profit at €207 million and revenue at €5.76 billion.

Write to Matthias Verbergt at [e-mail]

(END) Dow Jones Newswires

August 04, 2016 02:45 ET (06:45 GMT)

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