Finnish telecoms equipment maker Nokia reported Thursday a first quarter profit, but said it was disappointed by its networks unit's profitability ahead of its acquisition of rival Alcatel-Lucent. Nokia posted a net profit of 177 million euros ($198 million) in the January to March period, compared to a loss of 239 million euros in the first quarter a year ago.
Sales rose by 20 percent to 3.19 billion euros, or by 11 percent excluding currency effects. The group noted however "weak profitability" in Nokia Networks, which is now its core business area after Nokia sold off its mobile phone unit to Microsoft in 2014. "Nokia delivered a 20 percent increase in net sales and 25 percent increase in earnings per share in the first quarter. Underlying these results was excellent performance from HERE and Nokia Technologies, while good growth at Nokia Networks was offset by unsatisfactory profitability," chief executive Rajeev Suri said in a statement.
Nokia Networks saw its operating margin plunge from 7.7 percent to 2.4 percent. Mobile broadband, which accounted for 52 percent of Nokia Networks' sales, registered an operating loss. Nokia's share price plunged on the news on Helsinki's stock exchange, shedding 8.94 percent to 6.16 euros at 0800 GMT, three hours after the release of the earnings report. Alcatel Lucent stock was down 6.34 percent in late morning trading in Paris, after falling over eight percent earlier.
The two other units, the mapping and location system subsidiary HERE and patents and licensing division Nokia Technologies - which each accounted for about eight percent of sales - were more profitable, with operating margins of 4.2 percent and 72.2 percent respectively. Nokia is however hoping to divest HERE, while Nokia Technologies benefits primarily from licensing fees paid by Microsoft to use the Nokia brand.