To regain its position as a pioneer in 5G growth, Nokia Corporation (NOK) is ready to sacrifice its margins in the short term. The Scandinavian Group unveiled the first phase of its new strategy on 29 October, which lays out high-level strategic concepts and a new business model aimed at better positioning the organization in evolving markets and aligning it with consumer needs. The new model, which will take effect on January 1, will be outlined in depth on March’s Investor Day. The group will be divided into four sectors: mobile networks, IP and fixed networks, cloud computing and network services, and Nokia technologies.
Regarding mobile networks, the Nordic corporation says that completing its turnaround and regaining its 5G leadership is its immediate goal. Management will lose its profitability in the short term in order to do this. It expects an adjusted operating margin of about 0 percent in 2021, ahead of a big long-term boost.
On the network infrastructure side (formerly IP and fixed networks), with its technical leadership in Alcatel’s IP, optical, fixed and underwater networks, the group will concentrate on the building blocks and necessary solutions of critical networks to accelerate digitization across all sectors. In 2021, the industry is projected to reach an adjusted operating margin of between 5 and 9 percent, and continues to improve steadily over the longer term.
An adjusted operating margin of about 5 percent is anticipated in 2021 in cloud storage and network services that generate value for service providers and corporate customers as demand for essential networks accelerates, until a substantial increase over the long term.
Finally, by investing in innovation and its global patent portfolio, as well as searching for other licensing opportunities, Nokia technologies will continue to monetize and improve the value of the company’s intellectual property and licensing revenues. A slight increase in adjusted operating profit in 2021 and a steady performance over the longer term are expected to be reported.
Overall, the company keeps its forecast for next year unchanged and thus expects an adjusted operating margin of between 7 and 10 percent in 2021.
Nokia Corporation (NOK) stock was up 2.50% on Tuesday to $4.10.