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Nokia projects high profit from network unit

Nokia expects high profits in the coming months as success from its network division offsets the sale of its mobile devices arm to Microsoft earlier this year.

The Finnish company expects operating profit will reach 16 per cent of sales at the network unit in the current quarter compared with just 8.4 per cent in the previous quarter and it has helped to push sales up as well as reignite analysts’ confidence.

“The Nokia Solutions and Networks [NSN] margin guidance is certainly what’s pushing the shares up,” said Sami Sarkamies, an analyst at Nordea Bank AB in Helsinki, told Bloomberg. “But with the unit’s sales so far below expectations, management may need to make the trade-off and sacrifice some profitability to boost revenue. NSN needs to do much more to lift sales.”

NSN will provide some 90 per cent of Nokia’s sales following the sale of the mobile unit to Microsoft and it comes after Nokia cut 21,000 jobs at NSN in an attempt to kick start the business.

Rajeev Suri, who heads up the unit, is clear that now the division’s period of restructuring has come to an end it will turn its attention to “strengthening” its top-line performance.

The network unit was originally a joint venture between Nokia and Siemens before it was fully taken over by Nokia this year. Its customers include Vodafone with its main line of business involving selling antennas and base stations that transmit calls as well as allowing mobile device users to access the Internet.

It is widely recognised as being one of the big three global vendors in the mobile infrastructure sector and rumours of a tie-up with Alcatel-Lucent only strengthen this being the case. A deal wasn’t ruled out by Suri who stated that “it would not be wise to rule out something” that would give shareholders extra value.

NSN has become Nokia’s largest single unit after it decide to sell its mobile devices division to Microsoft for some £3.2 billion.

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