Nokia Oyj shares fell the most since 1991 after the Finnish company cut its outlook and paused its dividend, warning that an earnings boost from 5G mobile networks would take longer to materialize as it invests more in products to fend off rising competition.
The equipment vendor lowered earnings and margin expectations for this year and next, and said it would not distribute dividends for the third and fourth quarters of fiscal 2018.
Nokia is not expecting a recovery for its earnings until 2021, about a year later than previously. The stock dropped 24 percent at the open in Helsinki.
“Some of the risks that we flagged previously related to the initial phase of 5G are now materializing,” Nokia chief executive officer Rajeev Suri said in a statement, pointing to price competition and the steep cost of products.
Nokia will spend more on developing 5G products and making them less expensive, Suri said.
“We expect that we will be able to progressively mitigate these issues over the course of next year,” he said.
Adjusted earnings per share (EPS) for this year are now forecast at 0.18 euros to 0.24 euros (US$0.20 to US$0.27), down from 0.25 euros to 0.29 euros.
Daniel Djurberg, an analyst at Handelsbanken in Stockholm, said the guidance cut for this year was “hefty” and characterized the drop for next year as dramatic.
For next year, Nokia reduced its EPS expectations to 0.20 euros to 0.30 euros — down from 0.37 euros to 0.42 euros.
Price competition is particularly tough in China, while there is uncertainty related to the merger of phone carriers in North America, Suri said, a reference to the planned tie-up between Sprint Corp and T-Mobile US Inc.
If the two US operators are allowed to combine, that might curb demand for 5G equipment, assuming they can benefit from network overlaps.
“We do have an issue relating to higher product cost, which is not particularly surprising at this early stage in a new 5G radio cycle,” Suri said on a call with reporters. “Those costs typically go down significantly as scale increases and cost optimization work proceeds.”
Ericsson AB’s networks business has seen a return to form in recent years as the company has increased spending on 5G research and development, while at the same time trying to rein in other costs.
With yesterday’s announcement, it appears that Nokia is following in the footsteps of the Swedish firm, while also hoping that its broader so-called end-to-end product offering will lure more network technology customers.
“While I’m not completely satisfied with our current performance, I am confident that our strategy remains the right one,” Suri said.
Just a few years ago, the millennial generation — generally defined as those born from the early 1980s through the mid-1990s — was synonymous with youthful rebellion. However, now, as the millennials ease into early middle age, they are finding their path out of their parents’ basement to be a lot harder than it was for earlier generations. The fundamental problem is that millennials are not building wealth. The wealth of the median US household headed by someone 35 or younger has actually shrunk in inflation-adjusted terms since the mid-2000s, even as the wealth of older Americans has continued to grow. An
Gogoro Inc (睿能創意) yesterday launched its first electric bicycle, the Gogoro Eeyo 1, in Taiwan, after unveiling the bike in New York in late May and in France on Tuesday. The company said it would also introduce the series in other European countries such as Germany and the Netherlands. The “Eeyo project” is the fourth of Gogoro’s eight projects that concentrate on smart transportation, which includes Gogoro’s electric scooter, battery swap system and electric scooter sharing service, company founder and chief executive officer Horace Luke (陸學森) told a media briefing in Taipei. “There are various types of city commuters. We will not
EXPERIMENTAL DRUG: While news about a COVID-19 vaccine is more eye-catching, developing a treatment would be more viable, the Senhwa boss said Senhwa Biosciences Inc (生華科) aims to raise NT$1.5 billion (US$50.57 million) by issuing 15 million new common shares in the third quarter of this year to fund the research of new drugs, including the experimental drug Silmitasertib for the treatment of COVID-19, the company said on Monday. That would be the firm’s largest fundraising effort after it raised more than NT$1.4 billion from an initial public offering on the Taipei Exchange (TPEX) in April 2017, chief financial officer Sarah Chang (張小萍) told the Taipei Times by telephone. The price of the new shares would depend on the firm’s average share price
NOT A PANACEA: Offering 5G services would not solve the problem of declining telecom incomes, chairman Sheih Chi-mau said, expecting a flat 5G telecom revenue Chunghwa Telecom Co (中華電信) yesterday became the nation’s first telecom to debut its 5G services, offering tiered tariffs that include a threshold of NT$599 and flat rates, as it aims to switch half of its subscribers to the 5G network within three years. Subscribers would have unlimited data transmission for monthly fees starting at NT$1,399 — the same flat rate as when the company launched its 4G service in 2014 — and they can subscribe to the highest-rate plan for NT$2,699 per month for faster data transmission speeds and larger bandwidth, the company said. Data transmission speeds would be within the range