Nokia Q3 Results Down, To Cut Up To 14,000 Jobs; Stock Dips

Shares of Nokia Corp. were losing around 4 percent in the morning trading in Helsinki as well as around 3 percent in pre-market activity on the NYSE after the Finnish telecom major reported Thursday a sharp drop in its third-quarter profit and revenues amid ongoing macroeconomic challenges.

Further, the company maintained its fiscal 2023 outlook, but towards the lower end of net sales range. The company also maintained its long-term comparable operating margin target of at least 14 percent to be delivered by 2026.

Separately, Nokia announced a cost reduction program, expecting to cut up to 14,000 jobs, with a view to enable it to navigate the current market uncertainty. The company is streamlining operating model by embedding sales teams into the business groups.

The new cost reduction program is designed to lower cost base by 800 million euros to 1.20 billion euros on a gross basis over a three year period. This represents a 10 percent to 15 percent reduction in personnel expenses. The cost savings are expected to primarily be achieved in Mobile Networks, Cloud and Network Services and Nokia’s corporate functions.

Nokia sees at least 400 million euros of in-year savings in 2024 and a further 300 million euros in 2025. The program is expected to lead to a 72, 000 to 77, 000 employee organization compared to the 86, 000 employees Nokia has at present.

The company said the exact scale of the program will depend on the evolution of end market demand. The program is expected to deliver savings on a net basis but the magnitude will depend on inflation.

Looking ahead, for full year 2023, the telecom company continues to expect net sales of 23.2 billion euros to 24.6 billion euros, a change from last year between 4 percent lower to 2 percent higher in constant currency.

Comparable operating margin is still expected to be 11.5 percent to 13 percent, towards the mid-point, assuming closure of outstanding deals in Nokia Technologies.

In Nokia Technologies, the company remains confident the business group will return to a net sales annual run-rate of 1.4 billion euros to 1.5 billion euros.

Further, the Board resolved to distribute a dividend of 0.03 euro per share. The dividend record date is on October 24 and the dividend will be paid on November 2.

Pekka Lundmark, President And CEO, said, “Looking forward, while our third quarter net sales were impacted by the ongoing uncertainty, we expect to see a more normal seasonal improvement in our network businesses in the fourth quarter. Based on this and assuming we resolve the outstanding renewals impacting Nokia Technologies, we are tracking towards the lower end of our net sales range for 2023 and towards the mid-point of our comparable operating margin range.”

In the third quarter, Nokia’s profit fell 69 percent to 133 million euros from 428 million euros last year. Earnings per share declined 75 percent to 0.02 euro from prior year’s 0.08 euro.

On comparable basis, profit stood at 299 million euros or 0.05 euro per share, as against last year’s 551 million euros or 0.10 euro per share.

Operating income dropped 53 percent to 241 million euros, and comparable operating income was down 36 percent to 424 million euros. Comparable operating margin declined 350 basis points from last year to 4.8 percent.

In the quarter, net sales moved down 20 percent to 4.98 billion euros from 6.24 billion euros a year ago. Net sales declined 15 percent in constant currency as macroeconomic uncertainty and higher interest rates continue to pressure operator spending.

Network Infrastructure declined 14 percent in constant currency due to weaker spending impacting IP Networks. In Mobile Networks, net sales declined 19 percent.

In Helsinki, Nokia are currently trading at 3.118 euros, down 4.36 percent. In pre-market activity on the NYSE, the shares were trading at $3.28, down 3.24 percent.

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