Nokia CEO Rajeev Suri was crystal clear in an earnings call this week that the first quarter of 2019 was weak, but the network infrastructure vendor is sticking to its full-year guidance based on the expectation that 5G will deliver in the second-half of the year.
Suri made three primary points. Several business units are performing “very well;” the company knows why Q1 was soft; and “While we do see certain risks increasing, there are opportunities as well.”
To the second point: “Why the poor quarter and why do we expect both top-line and profitability to improve significantly as the year progresses? The answer is largely related to 5G. Our revenue recognition policies and contractual terms require reasonable commercial availability and customer acceptance of our own system software before we can recognize revenue related to a new generation of mobile technology.”
He continued: “Neither of this was fully in place by the end of Q1, but that situation is changing fast. We expect to see some improvement in Q2 and much more in the second half. To put this in perspective this situation means that we missed approximately EUR 200 million in 5G revenue recognition in North America alone in Q1 and we should see that come back in full before the end of the year.”
Here’s a full look at the company’s most recent financials.
In terms of opportunities, Nokia was out in full-force at the Hannover Messe industrial trade fair in Germany last month. The company, working with Qualcomm, set up a temporary 5G network to showcase how 5G in its current form can serve as an industrial-enabler, and further discussed how that will be refined with Release 16.
Nokia has made clear it sees private networks for the industrial set as a huge revenue opportunity.
As Suri put it, “Interest in 5G private wireless networks is particularly robust in utilities, transportation and the public sector. We also see significant opportunities in industrial automation solutions in the manufacturing and logistics segment.”
