Nokia has announced a two-year 600 million euro ($653 million) share buyback program set to commence this quarter, following a challenging 2023 where the company reported a significant decline in profit.
As of 1.48 p.m. London time on Thursday, Nokia shares surged 8.5%.
Despite being one of the world’s largest mobile network equipment manufacturers, Nokia faced a 23% year-on-year decline in net sales, totalling 5.7 billion euros in the fourth quarter. Comparable operating profit also witnessed a 27% year-on-year decrease, amounting to 846 million euros.
CEO Pekka Lundmark attributed the decline to a shift in customer behaviour driven by macro-economic factors and high-interest rates. The industry faced challenges as customers, particularly telecommunications networks, opted for using existing equipment rather than making new purchases—an approach termed as “inventory digestion.”
Lundmark acknowledged the persisting challenges in 2024, with the company forecasting a comparable operating profit ranging from 2.3 billion to 2.9 billion euros in the same year. Analysts expect operating income to hover around 2.4 billion euros in 2024, according to LSEG consensus estimates.
Nokia’s Mobile Networks division, its primary revenue source, saw a 17% year-on-year decline in sales to 2.5 billion euros in Q4. Lundmark cited top-line challenges for 2024, particularly in India, where investment in next-generation mobile networks is slowing down, and the impact of AT&T’s decision to partner with Nokia rival Ericsson for its 5G network.
Despite facing setbacks, Nokia remains optimistic about achieving its comparable operating margin target by 2026, though it has revised the target from at least 14% to at least 13%. This adjustment reflects the current market conditions in Mobile Networks and is deemed a prudent change.
Nokia’s outlook aligns with industry trends, as Ericsson also reported challenges ahead, citing reduced spending by customers and a slowdown in investment in India for 2024.
Paul Balo is the founder of TechBooky and a highly skilled wireless communications professional with a strong background in cloud computing, offering extensive experience in designing, implementing, and managing wireless communication systems.
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