Nokia, one of the world's largest makers of mobile network equipment, posted net sales of 5.7 billion euros in the fourth quarter, down 23% year-on-year. Comparable operating profit fell 27% year-on-year to 846 million.
“In 2023, we experienced a significant shift in customer behavior that impacted our industry, driven by the macroeconomic environment and high interest rates as well as customer inventory utilization,” Nokia CEO Pekka Lundmark said in a statement.
Inventory breakdown involves customers, such as telecommunications networks, using equipment they have already purchased rather than purchasing new equipment.
Lundmark said the “challenging environment” of 2023 will continue into 2024.
The company forecasts that comparable operating profit in 2024 will be between 2.3 and 2.9 billion euros. According to LSEG consensus estimates, analysts expect operating profit to be around 2.4 billion euros in 2024.
Nokia suffered as telecom operators cut spending on their networks. India, which has invested heavily in its next-generation mobile networks in recent years, is starting to slow down.
Mobile networks, Nokia's top-selling division, saw fourth-quarter revenue fall 17% year-on-year to 2.5 billion euros.
“In mobile, we expect significant challenges in 2024 related to a normalized pace of investment in India and the AT&T decision,” Lundmark said.
The company suffered a massive deal in December when US wireless carrier AT&T signed a deal with Nokia rival Ericsson to build a new type of 5G network in the US. AT&T's network will rely heavily on Ericsson rather than Nokia.
This deal has had an impact on Nokia, whose shares have fallen around 25% in the last year.
Lundmark called this a “disappointing development” that “does not reflect Nokia’s technological competitiveness.”
On Thursday, the company said it is now lowering its comparable operating margin target, achieved by 2026, from at least 14% to at least 13%.
“Nokia still sees a path to achieving the comparable operating margin target of at least 14%, but given current mobile market conditions, this was considered a prudent change,” Nokia said.
The company's warnings about its 2024 outlook come after rival Ericsson also reported a decline in fourth-quarter sales and operating profit. Ericsson also announced a challenging 2024, noting that customers are cutting spending and investment in India is slowing.