By Supantha Mukherjee
STOCKHOLM (Reuters) -Finnish telecom gear group Nokia (NYSE:NOK) on Thursday reported a drop in second-quarter profit due to a decline in margin as growth in sales of 5G gear in low-margin markets such as India failed to offset slowing demand in North America.
Nokia and rival Ericsson (BS:ERICAs) have been hit by slowing orders from customers, mostly in their high-margin North American markets.
“We were expecting a slowdown after a pretty strong 2021 and 2022, but gradually during the quarter we started to get signals from several operators in North America that they are slowing down their investments even more than previously estimated,” Chief Executive Officer Pekka Lundmark said in an interview.
The results come after Nokia last week cut its annual sales and profit margin outlook and Ericsson reported a big fall in quarterly profit.
The company said on Thursday it now expects second-half net sales broadly similar to the first half with some sequential improvement in the fourth quarter.
Lundmark said the demand impact was “mostly short term in nature” and that Nokia sees “this primarily as a question of timing.”
Comparable operating profit in the second quarter fell to 626 million euros ($702.37 million) from 714 million euros last year, but beat market estimates. A new patent license agreement with Apple (NASDAQ:AAPL) added to the results.
The decline in North American markets was somewhat offset by India but with a lower margin. Due to the change in regional mix, quarterly comparable gross margin declined 180 basis points to 38.8%.
“The Indian rollout is extremely fast at the moment and it is clear that there will have to be moderation next year,” Lundmark said.
Nokia made gains with Indian operators, particularly with the likes of Reliance Jio Infocomm, which was dominated by Samsung (KS:005930) for 4G, he said.
