Why Nokia Networks Isn’t All Bad News

Networks sales grew in Asia-Pacific

Nokia’s (NOK) largest division, Nokia Networks, reported a 9.0% YoY (year-over-year) fall in revenues in 3Q17. This division’s revenue decline accelerated from the 5.0% YoY fall we saw in 2Q17.

But it wasn’t all bad news for Nokia Networks in 3Q17, as many parts of the business showed some strength in during the quarter and could lay the groundwork for more wins in the future.

Why Nokia Networks Isn’t All Bad News

In terms of regions, Networks posted YoY sales growth on a constant currency basis in the Middle East and Africa and in Asia-Pacific (EEM). The global services and IP routing subset of the Networks business also registered a YoY rise in sales on a constant currency basis.

Notably, Nokia generates most of its Networks revenues in North America.

Networks margins improved in 3Q17

Orders also rose in many subsets of Nokia’s Networks business, with applications and analytics posting its fifth-straight quarter of order growth in 3Q17. Nokia said its overall Networks gross margin was up YoY to 38.6% in 3Q17.

The slowdown in spending by communications service providers on network gears has been one of the factors limiting revenue growth opportunities for telecom equipment vendors like Nokia and Ericsson (ERIC) in the networks market. With 4G LTE (long-term evolution) rollout reaching peaks in many key markets, the purchase of telecom equipment by network operators has slowed down.

Nokia hopeful over transition to 5G

But Nokia is hopeful that the transition to 5G networks will positively transform the fortunes of its networks division. AT&T (T) and Verizon Communications (VZ) are among the big network operators in the world with 5G network trials already underway.