Despite recently posting quarterly earnings that were below market expectations, Finnish telecom network equipment maker Nokia promised investors that its business would recover later this year with the rollout of 5G networks in the US.
The company's shares fell by eight per cent after it announced that its Q2 operating profit dropped from 42 per cent a year ago to $392m.
Nokia's small patent licensing division brought in 80 per cent of its profit while its networks business had a quarterly operating profit margin of just 1.5 per cent which was below the four per cent expected by analysts.
The network equipment business as a whole, led by Huawei, Nokia and Ericsson, has struggled since 2015 when 4G mobile equipment peaked.
Nokia's CEO Rajeev Suri noted that its business was facing competition from telecoms that have chosen to use their own funds for early 5G equipment purchases. In a conference call to reporters, Suri explained that the rollout of 5G in North America could boost its profits during the third quarter of this year, saying:
“We believe that the cycle for 5G will begin from Q3. It will be stronger in Q4, especially in North America, given that the relative mix of North America will progressively increase from Q2 to Q3 to Q4,”
After shuttering its healthcare business earlier this year, Nokia is betting big on the rollout of 5G and given its recent deal with China Mobile the new network standard could very well boost its sales significantly.
Image Credit: Kārlis Dambrāns