RAN returns strong growth but Nokia prepares for challenging year ahead

Even though Nokia delivered a solid Q4 to end 2020, which was at the high-end of its Outlook range, the leading global comms tech supplier has admitted 2020 was a year of incredible change where personal resilience, as well as technology, has been tested like never before, and that a tough 2021 lies ahead.

For the quarter ended 31 December 2020, Nokia reported net sales of €6.568bn (£5.75bn), slipping back 5% compared with the same time in 2019, primarily due to mobile access, as declines in network deployment and planning services were partially offset by growth in radio access products.

Core networks technology revenue slipped back by two percentage points more to reach €5.04bn (£4.41bn) while software sales actually rose 5% on an annual basis to €864m (£756m), and Nokia Technologies revenues rose 2% to €382m (£334m). Q4 enterprise net sales were up 1% in reported and 5% in constant currency. Overall operating profit for the quarter was €1.09bn (£950m), a fall of 4% compared with Q4 2019.

For the full year, total sales amounted to €21.867bn (£19.13bn), down 6% annually, with core network sales slipping back 7% over the year to total €16.865bn (£14.75bn). Yearly software revenues also slipped back, 4%, to €2.658bn (£2.33bn). Operating profit for the year almost doubled to €918m.

For full year 2020, enterprise business revenues were up 11% in reported and 14% in constant currency, reflecting said the company leadership position in many areas, including in private wireless. The company announced key partnerships with AT&T and Verizon for private wireless and won 79 new customers in Q4. We now have 260 private wireless customers. Public sector demand remains robust and we announced a US federal government cyber deal after the quarter end in mid-January.

Drilling deeper into the quarterly and annual performance, Nokia claimed “healthy” gross margin and operating margin performance for both Q4 and full year 2020, supported by a regional mix shift towards the higher margin North America region and by ongoing R&D efforts to enhance product quality and cost competitiveness.

At the end of 2020, Nokia announced a new operating model that it said would align the company better with the needs of customers and to better maintain and achieve technology leadership in the areas in which it did business. It also pointed out that in the network infrastructure arena it was jointly developing cloud-native 5G core solutions for CSPs and enterprise customers.

Yet as it was announcing its financial report for Q4 and the full year of 2020, Nokia president and CEO Pekka Lundmark cautioned that while he regarded these as encouraging results, the company expected 2021 to be challenging, a year of transition, with what he called meaningful headwinds due to market share loss and price erosion in North America. Winning in 5G in 2021 was a business priority.

“Delivering on our new operating model for a strong and sustainable long-term business requires us to make further 5G R&D investments in 2021, meaning we will sacrifice some short-term margin to ensure leadership in 5G,” said Lundmark.

“We took important steps in 2020 to accelerate roadmaps, improve execution and create a new way of working, which will enable Nokia to return to a sustainable long-term financial performance. We know we have our work cut out for us in 2021, but the new Group Leadership Team has hit the ground running.”