Nokia delivered a strong improvement in Q2, with better-than-expected profitability, significant improvement in cash generation, clear indications of a return to strength in mobile radio, and a year-on-year increase in earnings-per-share, despite the challenges of COVID-19.
(Nokia Earnings, 2Q 2020)
Gareth Owen's key takeaway:
- We believe Nokia has turned a corner and growth is returning driven predominantly by the Mobile Access business.
- As the Reefshark FPGA-to-SoC chipset transition accelerates, Nokia’s RAN products are becoming more competitive and profitable.
- Other positives included continued growth at the young Nokia Enterprise division, which recorded an 18% increase in revenues; Nokia announced that it now 180 private network customers.
- During the new few months, Nokia looks likely to benefit from the Huawei restrictions with a likely increase in market share. The company confirmed that it has received new interest from numerous MNOs, particularly in Europe.
- Interestingly, there are also signs that Nokia’s diversification strategy into software, IP routing and optical networking is finally beginning to pay off.
- Although revenues fell at all these businesses, Nokia was awarded data center contracts by several blue-chip tech companies during the quarter, including Apple, Baidu and Tencent – surely a vote of confidence in its optical networking technologies and a good omen for the future?