Nokia Screws Up Again As Shares Tank 25%
Nokia a key partner to Australian carriers rolling out 5G after Huawei was banned, have seen their share price tank overnight as high as 25%, after the Company who screwed up their dominant position in the Smartphone market revealed that like the past, they are struggling to make a profit.
This is despite the US administration opening the door for people to deal with Nokia and Erikson in the roll out of 5G.
The share collapse was the biggest daily drop since 1991 for the Finnish telecom equipment vendor who is currently licensing their name to UK Company HMD Global to make bottom end Nokia branded smartphones.
The Company has moved to slash its profit outlook through 2020 and they have suspended its dividend for the next six months.
CEO Rajeev Suri claims the Company is having trouble raising prices—especially in China, where its sales have slumped—and the expense of absorbing Alcatel-Lucent, the French telecom equipment giant Nokia bought in 2016.
5G was supposed to be a bonanza for Nokia but that is not proving to be the case claim analysts with Samsung now flexing their capability in the 5G network build market.
Nokia’s challenges with 5G and Alcatel-Lucent are telling, despite the Company only having two major competitors, Stockholm-based Ericsson, and Huawei who have successfully undercut Nokia on pricing.
The Washington Post wrote, Nokia only really has two competitors in the telecoms equipment business, and one of them — China’s Huawei Technologies has been all but banned from much of the market. At the same time, phone companies are opening their cheque books for a new generation of 5G technology that’s only supplied by Nokia, Huawei and the other big rival, Ericsson AB.
Pretty ripe conditions for a thriving business? Not for Nokia.
The gross profit margin at Nokia’s network arm still fell to 29% in the third quarter, down from 34% a year earlier. Suri ascribes that to the higher cost of 5G components. Because adoption of the technology isn’t yet widespread, economies of scale haven’t lowered its expenses. Unfortunately for Suri, Ericsson’s gross margin in the most similar part of its business increased slightly over the same period.