STOCKHOLM (Reuters) - Nokia (HE:NOKIA) expects a demand recovery in the second half of the year, it said on Thursday after weak sales of 5G equipment were offset by the Finnish telecom gear maker's tight lid on costs to achieve forecast-beating quarterly operating profit.
Telecoms equipment suppliers such as Nokia and rival Ericsson (BS:ERICAs) are set for a challenging year as mobile operators cut back on purchasing new 5G gear.
U.S. telecoms operator Verizon (NYSE:VZ)'s 2023 capital expenditure was $18.8 billion, down from $23.1 billion in 2022, with plans to cut spending to between $17 billion and $17.5 billion this year.
The weaker demand has prompted the likes of Nokia and Swedish rival Ericsson to rein in costs, including through job cuts, to boost profits.
Nokia's comparable earnings before interest and tax (EBIT) fell to 846 million euros ($920.2 million), from 1.15 billion euros in the same quarter a year earlier, but beat the 767.5 million euros expected by analysts in an LSEG poll.
Profit was boosted by stronger gross margins as sales shifted towards software.
"Overall we see results as strong in a difficult environment," J.P.Morgan analysts said in a note.
Nokia's share price rose about 7% in early morning trade, the biggest gainer on the pan-European STOXX 600 index
The company said it expects 2024 comparable operating profit of between 2.3 billion euros and 2.9 billion euros, compared with LSEG estimates of 2.38 billion euros.
"In network infrastructure, there are signs of a recovery," Chief Executive Pekka Lundmark told Reuters.
Lundmark expects a demand recovery in the second half of this year, pointing to improving order intake helped by demand from big technology companies and government spending on infrastructure.
Nokia, which laid out plans in October to cut up to 14,000 jobs, had signed a patent deal with Chinese smartphone maker Oppo and is close to resolving a dispute with another company.
CEO Lundmark, however, said Nokia would withdraw from its Chinese joint venture with Huawei.
The joint venture holding company - TD Tech Holding - had signed an agreement to sell the entire business to a consortium that includes Huawei Technologies, Nokia said.
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