Thursday, October 29, 2015

Nokia Reports Quarterly Results, Confirms ALU Purchase On Targe

Nokia Corporation reported Q3 net sales of EUR 3.0 billion (EUR 3.1 billion in Q3 2014), down 2% year-on-year (down 10% year-on-year on a constant currency basis).  Non-IFRS diluted EPS in Q3 2015 was EUR 0.08 (EUR 0.09 in Q3 2014), a decrease of 11% year-on-year.

Quarterly net sales for Nokia Networks decreased 2% year-on-year (11% year-on-year decrease on a constant currency basis), as strong net sales growth in Greater China partially offset decreases in North America and Europe. On a sequential basis, strong net sales growth in Greater China also helped to offset the impact of industry seasonality.

Rajeev Suri, Nokia's President and CEO, stated: "Nokia's third-quarter can be summarized in two words: progress and performance. Progress in moving the Alcatel-Lucent transaction closer to completion and solid performance across all of our businesses.  The performance at Nokia Networks was the highlight of the quarter, and allowed us to raise our full-year outlook for that business. Even if I am not pleased with the overall sales development, our strong profitability is testament to the strength of our operating model. We said earlier in the year that we would redouble our efforts to ensure our cost structure was aligned to market conditions, and the success of those efforts is very clear in our results. Nokia Technologies also had a solid quarter, with year-on-year growth in licensing revenues. Our commitment to bringing innovative new products to market was apparent with the announcement of the OZO virtual-reality camera. OZO has been extremely well-received and will be launched officially before the end of the year."

Nokia reported significant progress towards the closing of its transaction with Alcatel-Lucent. The companies have received all the necessary regulatory approvals to proceed with the public exchange offer. The Nokia Board of Directors has recently called for an Extraordinary General Meeting, to be held on December 2, to request shareholder approval for the transaction. Nokia now expects the deal to be completed in the first quarter of 2016.

Nokia also announced a planned EUR 7 billion program to optimize its capital structure and return excess capital to shareholders. This program would consist of approximately EUR 4 billion in shareholder distributions and approximately EUR 3 billion of de-leveraging. In addition, Nokia today accelerated its annual operating cost synergy target related to the Alcatel-Lucent transaction. Nokia now targets to achieve approximately EUR 900 million of operating cost synergies in full year 2018, compared to its earlier target to achieve approximately EUR 900 million of operating cost synergies in full year 2019.

The operating cost synergies are expected to be derived from a wide range of initiatives related to operating expenses and cost of sales, including:

  • Streamlining of overlapping products and services, particularly within the planned Mobile Networks business group;
  • Rationalization of regional and sales organizations;
  • Rationalization of overhead, particularly within manufacturing, supply-chain, real estate and information technology;
  • Reduction of central function and public company costs; and
  • Procurement efficiencies, given the combined company's expanded purchasing power.