Pekka Lundmark, who was appointed President and CEO of Nokia earlier this year, outlined further updates to the company's strategy and operating model. A first look at the new strategy was provided on October 29 - see below). Nokia’s previously provided outlook for 2020 and 2021 remains unchanged. In connection with its Q3 2020 results, Nokia expects comparable* operating margin of 7-10% in 2021.
“We are positioning Nokia to lead in a changing world,” says Pekka Lundmark, President and CEO of Nokia. “The world faces big problems: environmental issues, resource scarcity, inequality and stalling productivity. Technology will be an essential part of the solution. As a result, we will see an increase in critical networks, which will extend to all corners of society...”
“We are well positioned to be a trusted partner for critical networks. We are experienced in creating both carrier-grade performance networks and working with the world’s most demanding webscales. We have a strong position in technologies that are important for critical networks, such as open and virtualized radio access networks and we are on course for a 100% cloud-native software portfolio,” says Lundmark.
Some highlights from the presentation:
Mobile Networks’ immediate focus will be on executing its turnaround and regaining 5G leadership. It will focus on leadership in ORAN and vRAN, maintaining scale with CSP customers and growing its enterprise-dedicated Private Wireless Networks business. It is expected to deliver comparable* operating margin of around zero percent in 2021, and significant improvement over the longer term.
Network Infrastructure (previously IP and Fixed Networks) will focus on the building blocks and essential solutions of critical networks, using its technology leadership in IP Networks, Optical Networks, Fixed Networks, and Alcatel Submarine Networks to drive digitalization across all industries. It is expected to deliver comparable operating margin in the high single digit range in 2021, and gradual improvement over the longer term.
Cloud and Network Services creates value for both service providers and enterprise customers as demand for critical networks accelerates, leading the transition to cloud-native software and as-a-service delivery models. It is expected to deliver comparable operating margin in the mid-single digit range in 2021, and significant improvement over the longer term.
Nokia Technologies will continue to monetize and grow the value of Nokia’s intellectual property and licensing revenue by investing in innovation and its world-leading patent portfolio as well as pursuing other licensing opportunities. It is expected to deliver a slight improvement in comparable* operating profit in 2021, relative to 2020, and stable performance over the longer term.
Group Common and Other, which predominately consists of corporate costs, is expected to be run in a lean manner, with costs directly embedded into the business groups whenever possible. Group Common and Other is expected to deliver a comparable* operating loss of approximately €200 million in 2021.
Nokia's corporate re-organization focuses on four business groups
Nokia announced a corporate re-organization that focuses on four business groups:
- Mobile Networks, which will include mobile network products, network deployment and technical support services, and related network management. This business group will offer the full portfolio for customers wanting to buy mobile access networks. It will target leadership in key technologies such as 5G, ORAN and vRAN. The net sales of Mobile Networks in the last four quarters were approximately €10 billion. Tommi Uitto has been appointed as President of this business group.
- IP and Fixed Networks, which will include IP Routing, Optical Networks and Fixed Networks, as well as Alcatel Submarine Networks business, currently reported under “Group Common.” This business group will respond to the ever-increasing demand for higher capacity, greater reliability, faster speeds and lower costs. The net sales of IP and Fixed Networks in the last four quarters were approximately €7 billion. Federico Guillén has been appointed as President of this business group.
- Cloud and Network Services, which will include the existing Nokia Software business (excluding Mobile Networks network management), Nokia’s enterprise solutions, core network solutions including both voice and packet core, and managed and advanced services from its current Global Services unit. This unit will also act as a delivery channel of certain products from other business groups to enterprise customers. Cloud and Network Services will target growth by leveraging the industry transition to cloud-based delivery, network-as-a-service business models, and software-led value creation. The net sales of Cloud and Network Services in the last four quarters were approximately €3 billion. Raghav Sahgal has been appointed as President of this business group.
- Nokia Technologies, which will remain largely unchanged. The net sales of this business group in the last four quarters were approximately €1.4 billion. Jenni Lukander continues as President of this business group.
A new Customer Experience organization will also be formed to strengthen customer relationships across all businesses.
“Our industry is undergoing profound changes. Industrial automation and digitalization are increasing customer demand for high-performance networks, with a trend towards open interfaces, virtualization, and cloud native software. This will revolutionize how we design, deploy, manage and sell our products and solutions,” said Pekka Lundmark, President and CEO. “As we work to renew our strategy, we will ensure we are well positioned to leverage these trends, improve our performance and position the company for long-term value creation.”
