Nokia shares crash 20% as it struggles to compete in the race to 5G
Nokia is struggling to keep pace with its rivals in the race to 5G.
The Finnish telecoms equipment maker on Thursday cut its profit outlook for this year and next, and scrapped dividend payments. It warned investors of slumping orders in China and intense competition for 5G sales.
The barrage of negative news sent shares in the company down over 20% in Helsinki.
Nokia said in its earnings report that sales increased 5% during the first nine months of the year to €16.4 billion ($18.25 billion), but it failed to produce a profit for the period. The fight for 5G business, meanwhile, is only heating up.
“Competitive intensity has increased in some accounts as some competitors seek to share in the early stages of 5G,” Nokia said in the earnings report.
Nokia has signed 48 commercial contracts for 5G networks. Its rival Huawei has managed to sign 60 such contracts despite being on an American trade blacklist.
The United States has also discouraged mobile network operators around the world from using Huawei equipment on national security grounds. Huawei denies that its products pose a security risk.
Some analysts had thought that Nokia would benefit from the pressure on Huawei. But the disappointing results published Thursday were driven primarily by weakness in the division responsible for rolling out 5G.
Nokia’s networks unit posted an 11% decline in third-quarter gross profit to €1.3 billion ($1.5 billion), compared with the same period last year. This was partially the result of “relatively high 5G product costs, as well as elevated levels of deployment services, consistent with being in the initial phase of 5G,” Nokia said.
The company’s sales in China plummeted 21% to €425 million ($473 million) in the quarter on “continued competitive pressure,” the company said.
Ericsson, which competes with Nokia and Huawei, said last week that it expected higher sales next year than previously forecast on a stronger 5G market.
“5G is taking off faster than earlier anticipated,” CEO Börje Ekholm said in an earnings statement. The Swedish company said it had signed 27 commercial 5G contracts.
