Nokia revenue falls 7% in Q2 2014, but expected to strengthen by year end

Both sales and operating profit decreased in Q2, but CEO expects growth in Networks by end of year with profit at or slightly above its long term target range of 5% to 10%

Nokia revenue falls 7% in Q2 2014, but expected to strengthen by year end

In the second quarter of 2014 Nokia posted net sales of 2014 of EUR 2.9bn (£2.3bn) compared with EUR 3.2bn (£2.5bn) in Q2 2013 – a fall of 7%, but up 10% on the previous quarter. For the half year to 30 June, net sales decreased by 11% to EUR 5.6bn (£4.4bn) compared with EUR 6.2bn (£4.9bn) in 2013.

Non-IFRS operating profit was EUR 347m (£275m) down 19% on Q2 2013, but up 14% quarter-on-quarter. Operating profit for the first six months on 2014 was EUR 651m (£516m), down 5% on the same six months in 2013.

In comparison for the first half of 2014, Ericsson reported sales of £8.7bn, while Huawei saw sales revenues increase by 19% year-on-year to £12.8bn, although unlike its two rivals, it still has a mobile handset division. Nokia now comprises Nokia Networks, HERE and Nokia Technologies following the sale of the Devices & Services business to Microsoft.

Nokia Networks
Nokia Networks, which now makes up the bulk of Nokia following the sale of the handset division, achieved a strong underlying operating profitability with a non-IFRS operating profit of EUR 281m (£223m), or 11.0% of net sales, compared with EUR 328m (£260m), or 11.8% of net sales, in Q2 2013.

The company attributed the strong level of profitability for Nokia Networks in Q2 2014 and Q2 2013 primarily to operational efficiency, which benefitted both gross margin and operating profit. Nokia Networks net sales in Q2 2014 were EUR 2.6bn (£2bn), compared with EUR 2.8bn (£2.2bn) in Q2 2013.

HERE net sales in Q2 2014 were approximately flat on a year-on-year basis. Excluding foreign currency fluctuations, HERE net sales in Q2 2014 would have increased 2% year-on-year.

In Q2 2014, HERE sold map data licenses for the embedded navigation systems of 3.3 million new vehicles globally, compared with 2.7 million vehicles in Q2 2013. HERE continued to focus on investing in longer term transformational growth opportunities, and announced the acquisitions of Medio and Desti.

Nokia Technologies
Nokia Technologies net sales increased sequentially in Q2 2014, primarily due to Microsoft becoming a more significant intellectual property licensee in conjunction with the sale of substantially all of the Devices & Services business to Microsoft.

Commenting on the second quarter results, Rajeev Suri, Nokia president and CEO (pictured), said: “Nokia's second quarter performance shows the strength of the company today. In Nokia Networks, our unique operating model has allowed us to deliver strong profitability while improving our topline trend.

“Maintaining this balance will remain a clear priority in the second half of the year, when we expect Networks to return to year-on-year growth. Our expectations for the full year 2014 have improved and we now expect full year underlying profitability for Networks to be at or slightly above our long term target range of 5% to 10%.

“HERE demonstrated good year-on-year growth in its automotive business, and we continue to invest to expand in this area, as well as in the enterprise and consumer markets. The licensing and innovation engine of Nokia Technologies remains very much on track. We see opportunities to expand this business with both new and existing licensees, and the Technologies team continues to increase its industry-leading patent portfolio.

“This performance, along with the many conversations I have had with customers, partners, employees and others in my first quarter as CEO, gives me a high degree of confidence about our future,’” concluded Suri.

See also:
Huawei announces 19% increase in sales revenue for first half of 2014

Ericsson posts sharp rise in net profit on stable revenues for Q2

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