Nokia has again raised its target for cost reductions, after reporting a further slowdown in the mobile broadband market in Q2. Pro forma revenues, adjusted for the takeover of Alcatel-Lucent, fell 11 percent year-on-year to EUR 5.676 billion, and the company's adjusted operating profit was down 49 percent to EUR 332 million. The net result was a loss of EUR 726 million, hurt by around EUR 600 million in restructuring costs for the integration of Alcatel-Lucent as well as a write-off for a customer in Brazil.
Nokia Networks reported sales down 11 percent to EUR 5.228 billion, with mobile networks accounting for around 80 percent of the decline, Nokia said. The operating margin of 6.0 percent was reduced by almost a point by the impact of Brazilian operator Oi seeking protection from creditors. Nokia narrowed its outlook for the full-year operating margin at Networks, to 7-9 percent from a previous forecast of above 7 percent. Overall sales are expected to be lower at Networks this year, amid expectations of "flattish" capital expenditure by operators in 2016.
Nokia Technologies also recorded an 11 percent fall in sales, to EUR 194 million.
Nokia CEO Rajeev Suri said the weak market conditions were as expected, and the pressure on sales is not expected to relent soon. The "successful" integration of Alcatel-Lucent is continuing and supports the target of increased cost savings, he added. Nokia now aims to reduce operating costs by EUR 1.2 billion by 2018, up from an earlier target of over EUR 900 million compared to 2015. In addition, the company is still looking at strategic options for its submarine cable business.
For the third quarter, Nokia expects a "slight sequential" improvement in sales and the operating margin at its networks business. This should be followed by "significant improvement" in fourth-quarter results compared to Q3.
