Joint venture helped improve Nokia’s operating margin
European (VGK) giant Nokia (NOK) has given credit for its improving margins to its joint venture with Siemens. The joint venture is called Nokia Siemens Network (or NSN). Nokia’s CEO (chief executive officer) Rajeev Suri said the company’s operating margin “was the best for the network business since the formation of the Nokia -Siemens network joint venture, helped by software sales that were approximately 400 basis points above the same quarter last year.”
The graph below shows Nokia’s trend of improving margins. In the last quarter, Nokia’s operating expenses were down year-over-year (or YoY) on a constant currency basis, indicating the company’s ongoing discipline and ability to adjust to reflect market conditions.
According to a Nokia Networks customer experience survey, software quality levels are up five times since 2012. Nokia has also seen a 60% reduction in outages since 2011. The company is looking to streamline operations in the long run and tap the expertise of its manufacturing partners. As of December 2015, Nokia Networks operated four manufacturing facilities compared to ten at the end of 2011.
Sales benefit from a strong dollar
Nokia met analyst expectations in terms of revenues for 4Q15 and fiscal 2015, which ended December 31, 2015. Sales benefited from currency fluctuations. Nokia recovered from a weak 1Q15 to post good results in subsequent quarters. While net sales fell 5% YoY (year-over-year) in 4Q15, it fell 12% YoY on a constant currency basis.
Suri stated, “I’m not pleased with the decline in sales, but I also believe our performance is not inconsistent with others in our sector, and we have kept on focus on delivering strong profitability despite these conditions.”