Once a mobile giant, Nokia Corp has informed that its network businesses are underperforming. The first quarter output is showing depressing profit margins of its network arm but licensing unit have been performing well above the analysts’ predictions. As per the Nokia’s statement, the quarterly growth rate of its revenue was 15 percent.
The network arm earned the revenue of $2.94 billion. Operating profit dropped to EUR85 million from EUR216. Higher spending and more revenue coming from lower-end hardware sales have fuelled its unsatisfactory profitability. More profitable software deals would have earned better revenue, according to Rajeev Suri, Chief Executive Officer of Nokia Corp. The underlying profit margin was 9.3 percent last year and it dropped to 3.2 percent this year. The company was targeting the figure between 8 to 11 percent for long term sustainability. By the end of 2015, the company will achieve underlying operating profit somewhere in the middle of 8 and 11 percent, according to the management.
Analyst Mikael Rautanen from Helsinki based Research Company Inderes reacted that this will be seen as a negative outlook for the Nokia. The experts were expecting Nokia to cross the projected values of operating profit margin by them. Nokia sold its handset arm to the Microsoft Corp last year, since then it has been focusing on its business of telecom equipment and commercial software. The revenue for the last quarter increased to EUR3.20 billion because of strong dollar against the Euro. The number is represents quantitative side of the profit rather than actual business driven organic profit.