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How Could Nokia’s Primary Business Segments Perform in 4Q16?

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Nokia’s Networks segment

Nokia (NOK) has three business segments: Nokia Networks, Nokia Technologies, and Network Services. In Nokia’s Networks business, the Ultra-Broadband space saw revenues fall 13.0% YoY (year-over-year) in 3Q16.

Revenues for Mobile Networks, which is part of Nokia Ultra-Broadband, fell 15.0% YoY. The gross margin for this segment rose 1.0% in 3Q16, driven by cost savings and operational efficiency. Revenues in Fixed Networks rose 3.0% YoY in 3Q16.

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Nokia’s Mobile Networks segment accounted for more than 80.0% of Nokia’s YoY fall in its Networks business. Revenues fell due to lower LTE[1. Long-Term Evolution] rollouts and macroeconomic challenges in markets such as Russia, Latin America, and Ukraine. This segment also fell due to a sluggish economic environment in Europe (EFA).

Nokia Technologies

Net sales in the Nokia Technologies segment rose 109.0% YoY (year-over-year), driven by Nokia’s expanded licensing agreement with Samsung (SSNLF). In July 2016, Europe-based Nokia and Korea’s (EWY) Samsung agreed to expand their patent cross-license agreement.

Nokia said that its annualized net sales related to patent and brand licensing are expected to grow at a run rate of ~950 million euros by the end of 2016. The company expects this growth to positively impact sales from 3Q16.

China presents an opportunity for Nokia to grow its revenues. China Telecom (CHA) said it would expand 4G (fourth-generation) technology deployment in 19 provinces, including Shanghai. This provides an opportunity for telecom equipment companies such as Nokia and Ericsson to drive revenue growth in a sluggish macro-economic environment.

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