Nokia's Sales Slide Despite Big Deals with Apple and Samsung: What's Next for This Tech Giant?

Nokia Corp NOK reported a fiscal fourth-quarter 2023 net sales decline of 23% year-on-year (21% in constant currency) to €5.71 billion ($6.14 billion), missing the consensus of $7.05 billion. EPS loss was €(0.01) or $(0.01), and comparable EPS was €0.10 or $0.11, missing the consensus of $0.15. 

The reported net loss in the fiscal fourth quarter of 2023 was €(33) million, down from €3.15 billion profit in the fiscal third quarter of 2022. Comparable net profit in the fiscal fourth quarter of 2023 was €568 million, down from €929 million in the fiscal fourth quarter of 2022.

Network Infrastructure sales declined by 24% Y/Y in CC. Cloud and Network Services sales decreased by 5% Y/Y in CC, while Nokia Tech fell by 63% Y/Y.

Mobile Networks sales declined by 14% Y/Y in CC due to some moderation in the pace of 5G deployment in India, which meant the growth there was no longer enough to offset the slowdown in North America. 

In Nokia Technologies, the company inked significant long-term deals with Apple Inc AAPL and Samsung Electronics Co, Ltd SSNLF in 2023 and with Honor late in the year. Nokia also bagged a multi-year agreement with OPPO. 

In Network Infrastructure, Nokia bagged orders for its IP Routing business with good progress in the U.S. government initiatives in Fixed Networks.

Margins: Gross margin declined by 100 bps to 41.8%. Comparable gross margin decreased by 40 bps to 43.1% due to regional mix in Mobile Networks.

The operating margin decreased by 220 bps to 9.6%, and the comparable operating margin declined by 70 bps to 14.8%.

Nokia held €4.3 billion in cash and equivalents and generated €1.7 billion in free cash flow.

Dividend and Buyback: The Board proposed dividend authorization of €0.13 per share and initiated a two-year €600 million buyback program.

FY24 Outlook: Nokia expects the challenging environment to continue during the first half of 2024, particularly in the first quarter. However, improving order intake for Network Infrastructure and some specific deals will likely substantially improve Network Infrastructure net sales growth in the second half of 2024.

Nokia projects 2% – 8% growth for Network Infrastructure sales, (15)% – (10)% change in Mobile Networks sales, and (2)% – 3% change in Cloud and Network Services sales.

Nokia expects a 2024 comparable operating profit of between €2.3 billion – €2.9 billion and free cash flow conversion from a comparable operating profit of 30% – 60%.

Price Action: NOK shares traded higher by 8.50% at $3.70 premarket Thursday.

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