Nokia reports profit of €284 million, up from €12 million a year earlier

As Nokia transitions to being an infrastructure-led business following the sale of the bulk of its loss-making handset business to Microsoft, its Q2 results show improving prospects for the company.

“This performance, along with the many conversations I have had with customers, partners, employees and others in my first quarter as CEO, gives me a high degree of confidence about our future,” Rajeev Suri, president and CEO of Nokia, said.

The company issued a positive outlook for the rest of the year, stating it expects full-year non-IFRS operating margin for the Networks business to be “at or slightly above” its target long-term range of five per cent to 10 per cent. This compares with an earlier guidance of “towards the higher end” of that range.

It also said it “expects Nokia Networks’ net sales to grow on a year-on-year basis in the second half of 2014.

For the second quarter, it reported a (non-IFRS) operating profit of €281 million (US$377 million) for its biggest business unit, Nokia Networks, down 14 per cent year-on-year. Revenue in the unit was €2.57 billion, down eight per cent.

While sales in the Mobile Broadband business group increased by six per cent to €1.36 billion, the performance of its Global Services unit was less impressive, with sales decreasing by 19 per cent to €1.19 billion.

The company noted that it had divested businesses that were not consistent with its strategic focus, and exited certain customer contracts and countries. For the Mobile Broadband unit, the company benefited from strong sales in both LTE and core networks, partially offset by lower sales of radio technologies other than LTE.

The company noted lower recognition of revenue related to smartphone sales by the former Nokia Devices & Services unit and reduced sales to personal navigation device customers, offset by Microsoft becoming a more significant licensee and sales to vehicle customers.

Nokia also today named Ramzi Haidamus as president of the Technologies unit and member of the group leadership team, effective September 3. He has spent the bulk of his career at Dolby Laboratories.

The company also saw sales of €497 from its “discontinued operation” (the former Devices & Services unit), down from €2.58 billion. The unit was sold to Microsoft during the second quarter.

Operating profit for this unit was €3.08 billion, compared with a prior-year loss of €126 million, due to the gain of €3.2 billion resulting from the sale.

On a group level, the company reported a profit attributable to shareholders of €2.51 billion, compared with a prior year loss of €266 million, on revenue of €2.94 billion, down from €3.16 billion.

For 2014, the company benefitted from a €2.54 billion gain related to the discontinued Devices & Services business. In 2013, this unit contributed a loss of €168 million.

On an operating level, the company saw a profit of €284 million, compared with a prior-year profit of €12 million.

Following completion of the Microsoft deal, the company ended the period with net cash of €6.5 billion, compared with €2.1 billion at the end of Q1.