Finnish telecom group Nokia reported today that its network equipment business had significantly improved sales and profitability in the second quarter, sending its share price soaring more than six percent.
The company reported group sales increased nine percent compared with the same period last year, to 3.2 billion euros (USD 3.5 billion).
“I am particularly pleased by Nokia Networks, which rebounded dramatically from its tough start to the year,” Nokia’s chief executive Rajeev Suri said in a media conference call.
The group’s second quarter attributable net profit was down to 347 million euros, compared with 2.5 billion euros last year, the drop resulting from discontinued operations. Nokia’s Devices and Services unit — the unprofitable handset business — whose sale to Microsoft in 2013 was finalised in April 2014, contributed to net profit in the second quarter 2014.
Operating profit meanwhile almost doubled to 508 million euros in Q2, compared with 284 million euros last year.
“The result was very solid, far above my expectations. Particularly positive was that the profit margins of the network business recovered back to good levels after a weak first quarter,” analyst Mikael Rautanen of Finnish equity research firm Inderes told AFP.
Shares of Nokia surged 6.19 percent in late afternoon trading on the Helsinki market.
Despite recent media speculation of German carmakers seeking to acquire Nokia’s HERE unit for its mapping and location system activities, the company did not reveal any details of ongoing negotiations.
“I would like to reiterate that our goal is to find the best possible solution for Nokia and its shareholders, and for HERE and its employees and customers,” Suri said.
Rautanen estimates that while HERE’s share of Nokia’s profits is relatively small, the sale would have a positive impact on Nokia’s balance sheet.
“It would boost the company’s financial muscles so to speak,” he said.
In mid-April Nokia struck a 15.6 billion euro deal to buy its rival Alcatel-Lucent to create the world’s biggest supplier of mobile phone network equipment.
Suri said today Nokia expects to finalise the deal in the first half of 2016.
“Both of our companies are cooperating with all remaining authorities to close the deal as quickly as possible,” he said.