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How Did Nokia’s IP Networks and Applications Segment Do in 3Q16?

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Revenue fell 9.0% YoY

Nokia’s (NOK) IP (Internet Protocol) Networks and Applications business consists of IP/Optical Networks and Applications & Analytics (or A&A) business groups. Sales for this segment fell 9.0% YoY (year-over-year).

Sales in IP/Optical Networks fell 7.0% YoY, driven by Nokia’s decision to reduce sales of third-party products. Sales in the A&A segment fell 12.0% YoY in 3Q16. The gross margin in this business fell 170 basis points in 3Q16, whereas its operating margin fell 540 basis points.

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Nokia’s CEO (chief executive officer) Rajeev Suri said, “While the overall routing market was soft in the quarter, the underlying driver of customer demand in this segment, network traffic, remained solid. Pleasingly, not only did Optical’s net sales rise in the quarter, but it is also seeing increased traction with Tier 1 service providers and web-scale customers in North America and China.”

Nokia optimistic about A&A

In Nokia’s 2Q16 earnings call, the company stated that a portion of its A&A business remains attached to mobile equipment, whose performance has been impacted by global mobile market conditions. In 2Q16, Nokia launched IMPACT, its new IoT (Internet of Things) platform. It also launched a cloud-based solution for network signaling requirements called Nokia Dynamic Diameter Engine.

Nokia believes the A&A segment will drive revenue in the long term.

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