How Nokia Aims to Reduce Costs in Fiscal 2017



Nokia aims for major cost savings 2018

Nokia (NOK) aims to achieve cost savings of 1.2 billion euros by the end of fiscal 2018. The company expects cost savings of 250 million euros in 1Q17 after saving approximately 550 million euros in 2016. Nokia expects an operating margin between 8% and 10% in fiscal 2017.

Of the 1.2 billion euros in savings, Nokia expects 800 million euros to come from operating expenses and 400 million euros to come from the cost of sales. While restructuring and associated charges are estimated to be around 1.7 billion euros, restructuring and associated cash outflow is expected to be 2.2 billion euros.

Article continues below advertisement

Profit margins improved in 1Q17

In 1Q17, Nokia’s non-GAAP (generally accepted accounting principles) gross margins expanded 110 basis points to 40.8% from 39.7% in 1Q16. Its operating margin expanded 20 basis points to 6.3% in 1Q17 from 6.1% in 1Q16.

In calendar 2016, Nokia’s Ultra Broadband Networks had a gross margin of 36.5%, whereas the IP[1.Internet protocol] Networks & Applications business had a gross margin of 44.7% and the Nokia Networks business had a gross margin of 38.8%. Nokia Technologies had the widest gross margin of 96% in fiscal 2016. In comparison, the Ultra Broadband Networks, IP Networks & Applications, and Nokia Networks businesses had operating margins of 8.4%, 10.2%, and 8.9%, respectively, at the end of 2016.


More From Market Realist