Nokia’s Shares Rose After Low-Margin Business Earnings

On Friday, Nokia, Finnish multinational telecommunications, IT, and consumer electronics company, has reported a sudden rise in its second-quarter underlying profit. It has taken on a less low-margin business. In early trade, the company has sent its shares up by 13%, particularly in China.

The news comes following when the post of Chief Executive of the company has been taken over this weekend by Pekka Lundmark who upgraded its earnings outlook for 2020. This has been achieved by cutting less-profitable service business.

Now, formal chief executive Rajeev Suri said “We do not mind trading poor revenue which doesn’t have a high-quality margin for better revenue.”

In April through June, the company said its earnings have risen to 0.06 euros per share from 0.05 euros the last year. Previously, they had warned investors of a weak second quarter in the wake of coronavirus pandemic; however, they have raised its forecast for 2020 underlying earnings to between 0.20 and 0.30 euros per share, from 0.18-0.28 euros for 2020 underlying earnings.

According to Refinitiv Eikon data, its quarterly revenue had fallen by 11% to around 5.09 billion euros which are way below a consensus figure of 5.28 billion. It is estimated that the drop was due to the effects of the hit taken by the economy from COVID-19.

Nokia has lowered its outlook for its market share from its previous guidance of performing in its main markets, measured by revenue, in line with its rivals.

Liberum analyst Janardan Menon said, “While the improvement in profitability from extremely low levels is very encouraging, we are unsure of how much further Nokia can take such an improvement when sales are coming under significant pressure.”

After more than a decade, Suri has stepped down from the charge of Nokia and its Siemens Networks. The changes in leadership have come as major turbulence in prevailing European telecoms markets. Due to the ongoing pressure from some governments for operators to limit or exclude the use of Huawei’s 5G equipment.