Nokia reported a drop in third-quarter revenues, hurt by the slowdown in the mobile networks market, but offered a higher dividend for shareholders after a strong improvement in profits on its cost-cutting efforts.
Net sales fell 7 percent year-on-year to EUR 5.54 billion and were down 4 percent at constant exchange rates. The 9 percent fall in sales at the Networks division was led by weakness in the Ultra Broadband division, especially in North America and China, the company said. This was offset somewhat by 37 percent growth at Nokia Technologies, the company's licensing unit, which booked revenue from its settlement with LG.
Despite the lower revenues, the adjusted operating margin improved to 12.1 percent from 9.3 percent a year ago. This was driven by the strong performance at Nokia Technologies and improved profitability at Global Services, which helped offset lower results in Ultra Broadband networks. The gross margin also increased, to 39.7 percent from 37.9 in Q3 2016.
On a reported basis, the operating margin was a negative 4.2 percent, versus a positive 0.9 percent a year ago, due mainly to continued costs related to the Alcatel-Lucent merger. The net loss also widened, to EUR 0.03 per share from 0.02 a year earlier.
The improvement in underlying results prompted the company to increase its dividend for the year. Nokia proposed a dividend of EUR 0.19 per share for 2017, up from EUR 0.17 last year.
Looking ahead, Nokia said it expects the mobile networks market to remain challenging, with an estimated 2-5 percent decline in 2018. CEO Rajeev Suri also said the company expects restructuring costs to be somewhat higher than expected next year, in addition to extra costs for dealing with issues in the mobile networks business.
He said the pressure on the R&D team led to "some issues with the time taken to converge some products that have, unfortunately, impacted a small number of customers". This explained part of the revenue pressure at Mobile Neworks and an increase in expected network equipment swap costs. Nevertheless, the company still targets EUR 1.2 billion in cost savings next year.
