Nokia Q1 2019: Added new licensing partners like TCL, Audi, Porsche; Performance weak, but expected

Nokia released their Q1 2019 financial report today that surprised analysts that expected better performance. The Company announced an operating loss of €59 million, while the analyst’s expectation in a Reuters poll was operating profit of 305 million, reports Yahoo News.

Nokia’s CEO Rajeev Suri said that the Q1 was expectedly week and expects sharp revenue growth from 5G, with meaningful topline and margin improvements, in the second half of 2019. He adds that the competitive intensity increased slightly, as competitors “seek to be more commercially
aggressive in the early stages of 5G.”

With its Q1 2019 report, Nokia has a new Financial reporting structure. Now we have: Networks, Nokia Software and Nokia Technologies, in addition to “Group Common and Other”.

In Q1 2019, Nokia reported €5.032 billion in revenue, with an operating loss (non-IFRS) of €59 million, while the operating profit including costs like goodwill impairment charges, ALU integration, etc., decreased further from negative 354 million euros in Q1 last year, to 442 million euros in Q1 this year. All three mentioned Nokia segments posted a revenue growth, but the profit decreased in Networks and Software, while increasing in Nokia Technologies.

Nokia also offers “net sales by customer” breakdown, where we can see that the majority of revenue (4.2 billion euros) comes from CSPs (operators), while Licensees and Enterprise customers make together more than 600 million euros. The section Other, that includes Alcatel Submarine Networks (ASN) and Radio Frequency Systems (RFS), both of which are being managed as separate entities, reported 195 million euros in net sales in Q1 2019, 22% less than in the same period last year.

Regarding Nokia Technologies, revenue increased by 1% YoY to 370 million euros, with profit increase of 10% to 302 million euros. All of the net sales are related to licensing, with growth posted because of an “one-time catch-up” payment (40 million euros) by a new partner and sales of some patents. The recurring licensing net sales went down YoY.

Regarding HMD, Nokia says just that HMD announced new devices at MWC and gained approval to start selling phones via carriers in the US and Canada. We already wrote that OPPO Reno is using Nokia’s OZO Audio Technology, while phone manufacturers like TCL, Tinno and Wiko agreed to financial terms for licensing Nokia patents. In automotive space, where Daimler and others are requesting an anti-trust investigation by the EU against Nokia, the Company added Audi and Porsche as new licensees, joining BMW, Mini and Rolls Royce.

You can check the full report here (PDF).