Nokia Q4 Earnings Review: Margins Emerge As The Only Bright Spot As Nokia Bets On 5G And Smartphones Business
The world's leading network infrastructure company Nokia ( NOK ) released its Q4 and full year earnings on February 2nd. For the full, the revenue of the company rose by over 89%, refecting the acquisition of Alcatel Lucent in the network infrastructure division of the company. However, on a combined company basis, revenues were down 13% because of weak market conditions. Similarly, revenues from licensing business declined in comparison to Q4'16 because of absence of Samsung arbitration award which uplifted the top line in the same quarter last year. On a brighter side, gross margins of the company improved on an annual basis due to the efforts in efficiency and cost improvements such as job cuts and real estate site reductions. The 8.9% operating margin of the network business remained in lime light as it nearly touched the high end of the annual guidance of 7-9%.
Going forward the management of the company has guided for overall improvements in business because of better outlook associated with network infrastructure market in 2017. We believe that launch of Nokia smartphones can be the key driver for its licensing business. Apart from this, successful trials in an evolutionary phase to 5G can lead to bright long term prospects for Nokia's business.
A Stride Towards 5G Along With Launch Of Nokia Smartphones Can Steer Nokia's Growth
- Nokia has completed recent trials in 4.5G and 4.9G technology where it was able to achieve speeds up to 40 GBPS.
- Successful tests of innovative technologies put Nokia in a strong position against its competitor Ericsson who is also betting big on 5G technology. 5G will be the key driver for growth in future as the new investment phase in the network upgrades is likely to start by the end of this decade. Nokia already has 110 4.5G customers.
- Apart from this, Nokia branded Android smartphones were launched in China by HMD Global earlier in January this year. Nokia will get a royalty fee for each mobile phone sold under its brand name. This royalty fee will be a useful addition to the company's licensing business.
- Given the fact that Nokia was a leader in mobile phones industry during the start of this decade, it is likely that they still have a considerable loyal customer base which can help boost the sales of revamped Nokia phones. This was evident when the newly launched 'Nokia 6' phones were sold out in minutes during the first two online flash sales in China. Going ahead, more Android models are lined up for release in 2017.