Nokia Warns Network Sales to Fall

Telecom-equipment maker Nokia Corp. said it expects its networks business to decline further next year, while vowing to ramp up cost-savings as it struggles with weak demand and fierce competition.

The Finnish company said that it expects 2017 net sales of networks, its core business, to decline in line with its primary addressable market, which it estimated to shrink by a low single digit percentage. The firm flagged this warning in an investor briefing in Barcelona on Tuesday.

Nokia said the outlook was influenced by "competitive industry dynamics," and the "timing of major network deployments," among other things.

Over the past year, the telecom-gear industry has been hit by slowing demand by telecom carriers, as many of them have finished rolling out of latest-generation wireless networks, or 4G. At the same time, Nokia and its European peer Ericsson AB of Sweden are battling stiff competition from Chinese companies, such as Huawei Technologies Co.

Last month, Nokia reported a third-quarter net loss and a 12% year-over-year decrease in network sales.

Rajeev Suri, Nokia's chief executive, said the company's plan to save €1.2 billion ($1.3 billion) annually by 2018 is on target, but added that restructuring and other charges related to it are expected to amount to €1.7 billion, compared with an estimate of €1.2 billion earlier.

The company said the update stems from plans to mitigate a more challenging-than-expected market environment, with additional transformation initiatives, such as a further streamlining of sales costs and optimizing the use of its various sites.

To cater for telecom carriers' demand for a broader range of products, Nokia has acquired French rival Alcatel-Lucent SA, a specialist in fixed internet gear such as routers and switches.

"We aim to target superior returns through focused growth into more attractive adjacent markets, where high-performance, end-to-end networks are increasingly in demand," Mr. Suri said.

Nokia said it expects to increase its operating margin for its networks business next year to between 8% and 10%, from an estimated margin of 7% to 9% for full-year 2016. Nokia targets a long-term operating margin for its business of between 10% and 15%.

For 2016, Nokia said it targets a proposed dividend of €0.17 per share, subject to shareholder approval in 2017.

(END) Dow Jones Newswires

November 15, 2016 04:15 ET (09:15 GMT)

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