Nokia sees pick up in margins as turnaround takes shape

Telecoms equipment maker Nokia is forecasting a pick up in profit margins to 10-13% in 2023, as new CEO Pekka Lundmark charts a course to catch up with rivals in the race to deliver 5G networks.

Missteps with strategy during the early phase of the 5G cycle have led the Finnish company to lag behind Sweden’s Ericsson and China’s Huawei in the battle for work on next generation networks.

Lundmark, who took the helm in August, has introduced a new operating model with four business groups, cut his leadership team to 11 from 17 and plans to reduce employee numbers by up to 10,000 in the next two years.

Nokia currently has around 90,000 employees after thousands of job losses in the last few years.

“We have a clear and detailed plan for how we will reset the business, accelerate competitiveness and scale up our lead in the markets we choose to play in,” Lundmark said on Thursday.

“This plan will enable us to deliver double-digit comparable operating margins in 2023,” he said.

Nokia said in a statement ahead of presentations to investors later in the day that it also expected to grow faster than the market in 2023.

“It is a big company and the timeframe for turning the ship around is short but the new leadership starts off with more credibility than the old one which was constantly behind on the targets it set,” OP Bank analyst Kimmo Stenvall said.

In October, Nokia had cut its 2020 operating margin guidance to 9% from 9.5% and for 2021 forecast a margin of 7-10%.

The company, which halted its dividend in October 2019, said its board would assess the chances of proposing a dividend for 2021 after the fourth quarter. Reuters