Nokia 3Q profit beats expectations despite chip shortage

HELSINKI, Finland  -- Nokia, a maker of wireless and fixed-network equipment, reported Thursday a third quarter profit that exceeded analyst expectations. The company said it increased sales of 5G technology and trimmed expenses. However the company cautioned that the market outlook was cloudy due to a global shortage of semiconductors and could hinder growth.

Nokia 3Q profit beats expectations despite chip shortage

HELSINKI, Finland  -- Nokia, a maker of wireless and fixed-network equipment, reported Thursday a third quarter profit that exceeded analyst expectations. The company said it increased sales of 5G technology and trimmed expenses. However the company cautioned that the market outlook was cloudy due to a global shortage of semiconductors and could hinder growth.

In July-September, Espoo, Finland-based company posted a net profit of 463 millions euros ($537million) compared to 305 million euros last year. From 300 million euros a year ago, net income attributable shareholders increased 51% to 454 million euros.

Nokia's sales increased by 2% to 5.4 billion euro.

CEO Pekka Lendmark stated that the company had "delivered another fantastic quarter" thanks to its increased investments of hundreds of millions of euro this year in 5G technology development.

He said that uncertainty surrounding semiconductors had impacted the outlook for the fourth-quarter and beyond 2022. A shortage of semiconductors has caused a shortage in chips for Nokia's products and those of its competitors.

Lundmark stated that "We could have grown faster" (in the third quarter), if there had been enough components. He also said that Nokia was working closely to resolve the problem of semiconductor availability.

Nokia's executive has pledged to be the global leader in 5G technology, even if this means losing short-term profitability. Nokia is currently in a close race against Ericsson, a Nordic competitor, and Huawei, a Chinese company.

Lundmark acknowledged earlier this year that Nokia faces problems in certain markets, such as the United States, where it has lost market share, despite a growing market for 5G products. Despite Nokia's important 5G deal this year with China Mobile, its penetration in China remained low.

Thursday's announcement by Lundmark indicated that "headwinds" in America's market were countered in the third quarter. He said strong growth in Nokia’s fixed networks business was a result of the COVID-19 pandemic, which has seen booming sales at private homes and other locations of fixed broadband connections. Sales for fixed networks grew 30%, to 588 million euros, quarter-on-quarter.

Nokia stated that it expected its operating profit margin to be comparable to 10% to 12% for the full year 2021. Based on strong performance during the first three quarters, Nokia said that the figure would be near the top end of the range.

Lundmark stated that "the key uncertainty" continues to be the supply-chain of semiconductors and that he was working with both his customers and suppliers every day to resolve the problem and ensure availability of the company’s products. This statement was made in a YouTube video posted after the publication of Nokia's earnings report.

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