Nokia(US:NOK)2024-04-18 11:25Financial Data and Key Metrics Changes - The company reported a 19% year-on-year decline in net sales in constant currency for Q1 2024, attributed to a weak spending environment [4][9] - Gross margin improved significantly to 48.6% year-on-year, driven by better performance in Mobile Networks and deals in Nokia Technologies [9][10] - Free cash flow generation was strong, with nearly €1 billion generated in the quarter, aided by catch-up payments and working capital improvements [7][45] Business Line Data and Key Metrics Changes - Network Infrastructure sales declined by 26% year-on-year, with a notable 23% decline in Submarine Networks due to project timing and geopolitical issues [27] - Mobile Networks experienced a 37% decline in net sales, primarily due to normalization after significant 5G deployments in India and low activity levels in North America [11][13] - Nokia Technologies saw an increase in net sales run rate to approximately €1.3 billion, benefiting from smartphone licensing deals [25][29] Market Data and Key Metrics Changes - The company noted significant declines in India and North America, while growth was observed in the Middle East and Africa [13] - The outlook for Fixed Networks has improved, with expectations for recovery in the second half of 2024 [5][24] - The company highlighted that over 70% of homes globally, excluding China, remain unconnected by fiber, indicating substantial market opportunities [15] Company Strategy and Development Direction - The company is executing a cost reduction program targeting €800 million to €1.2 billion in savings by 2026, with €500 million in savings expected in 2024 [6][35] - Nokia is focusing on expanding its presence in new growth areas such as automotive, consumer electronics, IoT, and multimedia [33] - The company remains committed to R&D investment while optimizing margins during the current weak market environment [35] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a challenging environment in the first half of 2024 but expressed confidence in improved order trends and a stronger second half [4][24] - The company expects Network Infrastructure to return to growth in full-year 2024, supported by improving order intake [10][24] - Management emphasized the importance of maintaining a strong competitive position in 5G and future technologies like 6G [116] Other Important Information - The company completed its smartphone licensing renewal cycle, which will provide stability and allow for focus on new growth areas [25] - The company ended the quarter with a net cash balance of €5.1 billion, positioning it well for future investments [27][45] Q&A Session Summary Question: Full-year guidance and outlook - Management remains confident in the full-year forecast despite steeper declines in network segments in Q1, with positive order trends continuing from Q4 [58][60] Question: Impact of organizational changes on operations - The reshuffling of the organization has been completed, and management is seeing increased traction and speed in operations post-restructuring [40] Question: Visibility on Mobile Networks sales growth - Management indicated that Q1 represented a low point for Mobile Networks, with expectations for improvement in subsequent quarters based on order backlog and customer discussions [88][111] Question: Growth in routing and switching business - The company is targeting rapid growth in the switching business, particularly with web scalers, and is optimistic about ongoing undisclosed deals [121] Question: Impact of AT&T deal on sales - Management confirmed that the AT&T situation has been factored into their sales expectations, with ongoing negotiations still in progress [66][118] Question: China market impact - The company has not seen significant impact from recent news regarding foreign chips in telecom equipment, as its market share in China is relatively low [101][120]