STOCKHOLM: Nokia boosted its long-term profitability target as Chief Executive Officer Rajeev Suri makes progress with an effort to rebuild the Finnish company around wireless-network equipment.
The adjusted operating profit at the networks unit, which makes up about 90 percent of Nokia’s revenue, is targeted at 8 percent to 11 percent of sales, the Espoo, Finland-based company said on Friday. Analysts on average predict 10.8 percent for 2015 and 10.6 percent for 2016, according to Nordea Bank.
Suri, who took over in May after Nokia sold its money-losing mobile-phone unit to Microsoft for about $7.5bn, is seeking to match investor expectations for rising earnings as demand for network gear recovers. He started reviving profit with job cuts in his previous role as head of the network unit and is focusing on more profitable contracts amid competition from Ericsson and Huawei Technologies.
Nokia’s previous margin goal for long term — a period it doesn’t define — was 5 percent to 10 percent, though the company had already projected that measure to be slightly above 11 percent for 2014. For next year, Nokia predicted the network division’s margin will meet the new target, signaling it may decline from this year. Revenue at the networks division will expand next year, Nokia forecast. The company also projected rising sales for its maps and patents divisions for 2015.
Suri eliminated more than 25,000 jobs at the network unit to bring the business back from losses, while focusing on more lucrative network contracts.
Nokia said last month it won a $970m order from China Mobile to provide fourth-generation equipment, software and services through 2015. Nokia is also counting on its two other businesses to drive sales and lift margins. Its digital-map business provides data to Amazon.com Inc, Microsoft, Yahoo! Inc and four out of five car-navigation systems.
WP-Bloomberg
