Helsinki: Telecom networks company Nokia saw its shares rise on Thursday after it raised its outlook for the year and said it would distribute $4.4 billion to shareholders, despite a drop in third quarter earnings.
Revenue in the period was down 2% from a year earlier at $3.34 billion due to lower demand in North America and Europe. Net profit fell 20% to $168 million, partly due to shifts in currency values, as well as higher interest and tax expenses.
But operating margins beat market expectations and the company’s share price shot up 9% to 6.64 euros in early trading in Helsinki.
CEO Rajeev Suri said that although he was not pleased with overall sales, the profitability of the networks sector which accounts for 95% of revenue allowed Nokia to raise its full-year forecast. Operating margins are expected near the upper end of 8-11%, whereas previously it predicted them around the midpoint of that range.
“Our strong profitability is testament to the strength of our operating model. We said earlier in the year that we would redouble our efforts to ensure our cost structure was aligned to market conditions, and the success of those efforts is very clear in our results,” he said.
Sami Sarkamies, senior analyst at Nordea Bank said the result was “excellent, with a positive surprise” from the networks unit.
“Sales were as expected and the margins were clearly higher than expected, allowing the company to improve profitability expectations for the year,” Sarkamies said.
Lower sales in North America and Europe were partly offset by a 27% increase in sales in greater China, both in broadband and global services.
In anticipation of next month’s shareholder meeting, which is expected to approve the 15.6 billion euro acquisition of ailing French telecom company Alcatel-Lucent, Nokia said it will pay 4 billion euros to shareholders.
Suri described the acquisition, which will make the Finnish company among the global market leaders in networks, as providing “a very strong long-term value creation opportunity.”
Nokia Corp. has shown signs of improved fortunes since selling off its ailing cellphone unit to Microsoft for 5.4 billion in 2013. In August, it announced the sale of its HERE mapping business valued at some $3.1 billion to a consortium of German automakers Audi, BMW and Daimler.
Nokia employed more than 57,000 people in the quarter, up more 8% on a year earlier.