Nokia Speeds Up Transformation To Improve Profitability


By Oystein Bergmann, Correspondent Scandinavia

Nokia is holding its Capital Markets Day 2021 and providing an overview of long-term market trends, how it is setting itself up for value creation, detailed plans for each of its business segments, its financial outlook and its updated dividend policy.

“Nokia is repositioning itself to deliver sustainable, profitable growth, adapting our business to lead in an increasingly digitalized world. We have a clear and detailed plan for how we will reset the business, accelerate competitiveness and scale up our lead in the markets we choose to play in. This plan will enable us to deliver double-digit comparable operating margins in 2023,” says President and CEO of Nokia, Pekka Lundmark.

“We have moved away from end-to-end as a cornerstone of our equity story and have instead put in place four fully accountable, empowered business groups, arranged according to how customers buy. Each of these business groups has solid strategies and targets to grow market share and margins through enhanced technology leadership,” he continues.

Nokia sees a number of major trends impacting the industry over the next few years, with 5G and resulting technologies at their core and creating opportunities for CSPs, enterprises and webscales.

These trends include next-generation access with fiber-to-the-home and optimized transport technologies delivering a seamless experience for consumers in homes and workplaces, enabling a “gigabit society” when combined with mobile 5G. In addition, connected digital enterprise will drive massive productivity, efficiency and safety gains across industries. A result of this will be significant growth in the Enterprise market.

“5G is still in its early phase. We estimate that the peak of the 5G market will last roughly twice as long as it did with 4G. So these trends of next generation access and digital connected enterprise still have a long way to run. I want Nokia to be able to shape them, delivering best-of-breed products, services and connectivity that allow our customers to deliver constantly improving performance,” says Lundmark.

New company purpose

The world is changing rapidly and facing fundamental challenges. Pressure on the planet is increasing, productivity is stalling and access to opportunity remains stubbornly unequal.

Nokia believes technology is central to the solution.

Technology can help to respond to climate change through more efficient use and re-use of the world’s resources. It can be essential for restoring productivity growth by digitalizing physical industry, and it can help provide more inclusive access to work, healthcare, markets and education.

 “With that in mind, our new purpose at Nokia is to create technology that helps the world act together. With our customers, we create the critical networks that bring together the world’s people, machines, and devices. And everything we do in our business will contribute to this aim” Lundmark continues.

To deliver on its refreshed purpose, Nokia will strengthen its position as a trusted partner for critical networks, which underpin more and more mission-critical functions for businesses and across societies. In addition, Nokia focuses on technology leadership in each of its businesses and captures the value shift to cloud and new business models as critical networks evolve. Nokia also creates value with long-term research and intellectual property which provide both the technology and the financial platform for the company to be successful over the long term.

In addition, Nokia is refreshing its ways of working and promoting a culture where its people are open to continuous development, fearless to experiment and empowered to act with clear accountability.

Reset, Accelerate, Scale – three phases to delivering above market growth

To deliver on its targets for sustainable growth Nokia has set out a three-phased approach.

First, an ongoing reset, with focus on securing technology leadership; implementing the new operating model to reduce complexity and increase accountability; securing full portfolio competitiveness in Mobile Networks; resetting its cost base; and renewing the ways of working.

From 2022 onwards the company will accelerate competitiveness and aims to grow margins through enhanced technology leadership, digitalization of own operations, automation and capturing emerging opportunities. It then plans to scale up to drive growth in new use cases and business models including in enterprise and private wireless in order to grow faster than the market.

Market development 2020 to 2023

Nokia’s total estimated addressable market is expected to grow at a compounded annual growth rate (CAGR) of approximately 1 per cent from 2020 to 2023, comprising of the following estimates:

  • Mobile Networks estimated 2020 – 2023 addressable market CAGR, excluding China, of approximately 1 per cent;
  • Network Infrastructure estimated 2020 – 2023 global addressable market CAGR of approximately 2 per cent;
  • Cloud and Network Services estimated 2020 – 2023 global addressable market CAGR of 2 per cent.

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