Receive free Nokia updates
We’ll send you a myFT Daily Digest email rounding up the latest Nokia news every morning.
Nokia cut its annual sales forecast on Friday while Ericsson reported a steep fall in quarterly profits, as a slowdown in customer spending in the US hit Europe’s two largest telecoms equipment makers.
Both companies said customers, especially in North America, were curbing spending and reducing inventory levels amid high inflation and rising interest rates, in a sign of a potential prolonged slowdown across the sector.
In an update on Friday, Finland’s Nokia said sales would now be between €23.2bn and €24.6bn this year, down from an earlier forecast of €24.6bn to €26.2bn, as a tougher economic backdrop weighed on customers.
The company also trimmed the top end of its profit margin range to 13 per cent from 14 per cent, keeping 11.5 per cent as the bottom.
Telecoms groups have been hurt by a worsening economic outlook that has forced businesses to slash their budgets and pull investment in technology and upgrades, particularly in markets such as the US.
“Customer spending plans are increasingly impacted by high inflation and rising interest rates, along with some projects now slipping to 2024 — notably in North America,” Nokia said. The company added the lower forecasts related to its network infrastructure and mobile networks units.
Nokia said it had been “proactively managing costs to protect profitability” and would “continue to take measures to ensure it remains on track towards its long-term targets of growing faster than the market”.
Sweden-based Ericsson reported a 62 per cent drop in its operating profit for the three months ended in June on Friday, slightly beating market expectations. The decline was driven by a 42 per cent fall in comparable North American sales year-on-year.
Sales growth in India partly offset the “softening” in other markets, “notably in North America, where buildout pace moderated and customer inventory levels were reduced”, said chief executive Börje Ekholm.
Ericsson’s shares fell 8 per cent on Friday morning. Shares in Nokia, which have been tumbling since April after missing quarterly profit estimates, were down 10 per cent.
In an earnings call on Friday, Ekholm said that he expected “a gradual recovery” in the market towards late 2023 and an improvement in 2024.
“You cannot get away from the macroeconomic headwinds,” said Paolo Pescatore, analyst at PP Foresight, adding that coupled with “challenges with supply side constraints, notably sourcing chipsets, this could potentially be the start of a long winter for telecom equipment manufacturers”.
Read the full article here
