Nokia Plunges 20% as Telecoms Giant Warns 5G Competition Will Slash Profits

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Giant Warns 5G Competition Will Slash Profits Nokia Plunges 20% as Telecoms Giant Warns 5G Competition Will Slash Profits

Nokia’s stock has plunged almost 20% after the Finnish telecoms giant cut profit forecasts due to intense competition over 5G.

Nokia Plunges 20% as Telecoms Giant Warns 5G Competition Will Slash Profits

Nokia’s stock has plunged almost 20% after the Finnish telecoms giant cut profit forecasts due to intense competition over 5G.

https://www.barrons.com/articles/huawei-ericsson-tech-cold-war-us-china-51555429282 https://www.barrons.com/articles/potential-impact-of-a-huawai-ban-51550096018 https://www.marketwatch.com/story/nokia-shares-drop-24-after-cutting-2019-2020-outlooks-2019-10-24 https://www.marketwatch.com/story/global-caution-over-5g-puts-pressure-on-nokia-2019-10-24 Nokia Plunges 20% as Telecoms Giant Warns 5G Competition Will Slash Profits By Callum Keown Getty Images

Nokia’s stock has plunged 20% after the Finnish telecoms giant cut profit forecasts due to intense competition over 5G.

The telecom equipment maker said it needed to boost investment in 5G networks as it fights with rivals for global contracts.

The back story. Nokia, Swedish rival Ericsson and Chinese supplier Huawei are locked in an intense battle over the rollout of 5G across the world.

The next generation mobile networks will bring faster data speeds powering technologies such as driverless cars, military communications and smart electric grids and transportation systems.

Huawei has remained in the game - securing more than 50 commercial contracts - despite an ongoing dispute between the U.S. and China, sparked by claims Beijing could use its equipment for spying.

Last week Nokia’s Swedish rival Ericsson beat earnings expectations and raised forecasts for this year and 2020 due to “much faster pace of introduction of 5G than expected.”

Ericsson also warned of high initial costs for new 5G products and expected challenging margins in China.

What’s new. Nokia’s third quarter results beat expectations but these were completely overshadowed as the telecoms giant cut its 2019 and 2020 profit outlook, citing intense 5G competition.

The Finnish company said it had faced high costs with its 5G products, profitability challenges in China and pricing pressure in early deals.

It also said dividend payments would be halted in order to boost investment in the next generation mobile network.

As a result, the company dropped its 2019 profit outlook to earnings per share of 0.18-0.24 euros from previous forecast of 0.25-0.29 euros.

Nokia said it has now struck 48 commercial contracts, closing in on Huawei.

Third quarter net sales of €5.7 billion ($6.35 billion), a 4 % increase on the previous year, beat consensus estimates of €5.6 billion and the company said it expected a strong fourth quarter.

However, investors were spooked by the outlook downgrade as shares plummeted 20% on Thursday.

Looking ahead. The 5G battle has certainly been fierce so far and Nokia’s warnings show just how intense the competition has become.

A solid third quarter has been ignored by investors, who are understandably fixated by the race for business to build the fast-growing networks.

The hefty profit guidance cut will keep shares under pressure but the ballooning costs of the 5G fight will be of equal concern.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.