Nokia recently acquired its peer firm Alcatel-Lucent. Nokia saw much-dropped profits last quarter. The telecom operators are spending lesser and denying to take new orders due to the Nokia-Alcatel merger. This caused the drops in the profits this quarter.
In the Reuters poll, analysts assumed EUR 400 million profit for Nokia in the second quarter. But Nokia got EUR 332 missing the average assumed.
The merger is going to cost Nokia about EUR 17 billion. Nokia said that it now targets to save EUR 1.2 billion in 2018. Its previous annual saving was EUR 900 million.After the deal of the merger, Nokia now is lifting its cost-cutting targets. Its group sales are 11% down this year to end at EUR 5.67 billion. Also, the network equipment sales came down to 5.23 billion. It's much lesser than the market assumption of 5.42 billion.
The drop in network sale of the company from assumption continued this year too. It also raised its operating margin target from 7 to 9. Second quarter gave network margins of 6 percent, while assumed value was 6.8.
The company is ready to let go off of its 10 to 15 thousand employees from a staff of 104,000. Anonymous internal sources also revealed that the firm would reduce around 1300 jobs in Finland. Global figure is not disclosed.
Nokia says, “It’s too early to discuss any global reduction number. We are only starting the country-specific processes. It will proceed according to local legislation and practices,
Rajiv Suri, the Chief Executive of Nokia, stated, "We expect to see slight sequential improvement in net sales and operating margin in our networks business from the second quarter to the third. Also, we expect significant improvement from the third to the fourth quarter."
The Finnish firm, Nokia acquired the Franco-American, Alcatel-Lucent to give a better fight to Ericsson and Huawei. Nokia wants to fight the market war with limited profit hopes and is waiting for the fresh network upgrade cycle around 2020.
Nokia already sold its phone business to Microsoft in 2014. Thus the Nokia left with its networking business and some technology patents. Microsoft also abandoned the acquired business to a large extent. Nokia recently in May signed a license agreement to bring back the Nokia smartphones.