Ahead of 5G, Nokia shares drop on lower earnings forecast, details

Shares in Nokia tumbled 20 per cent on Thursday after the Finnish telecommunications equipment maker cut its earnings forecast in the face of intense competition to build the latest 5G mobile networks. While returning to profit in the third quarter, the company said it was downgrading its expectations for earnings and margins for this year and 2020 "due to margin pressure, additional 5G investments and additional digitalisation investments." Nokia and its rivals Ericsson of Sweden and China's Huawei are engaged in a fierce battle to roll out 5G, with both Ericsson and Huawei upgrading their outlooks as the market appears to be taking off.

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Nokia targeting 9.5% margin for 2020

Nokia, in contrast, "is still struggling to get itself into a competitive position in the market. I would say overall the report and the outlook is a huge disappointment," Inderes analyst Mikael Rautanenhe told AFP.  The company posted net profit of 82 million euros (USD 91.2 million) in the three months to September, compared to a loss of 79 million in the same period a year earlier.  Operating or underlying earnings swung to a profit of 264 million euros from a year-earlier loss of 54 million euros.  And third-quarter sales were up 4.0 per cent at 5.69 billion euros. Looking ahead to the full year, Nokia said it now expects operating margin -- underlying profits measured as a proportion of sales -- to come out at around 8.0 per cent for 2019, instead of a previous forecast of 9.0-12.0 per cent.

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And for 2020, Nokia is targeting a margin of 9.5 per cent, give or take 1.5 percentage points, instead of the previous forecast of 12-16 per cent.  "Nokia delivered a solid third quarter... and good progress towards meeting our 2019 cost reduction goals," chief executive Rajeev Suri said in a statement.  Nokia said it would press ahead with its savings programme, but would scale back slightly in view of the additional investment in 5G and digitalisation.

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