Nokia (NOK) 28 Oct 212021 Q3 Earnings call transcript

Good morning, ladies and gentlemen. And welcome to Nokia's Third Quarter 2021 Results Call. I'm David Mulholland, Head of Nokia Investor Relations. And today in espo with me is Pekka Lundmark, our President and CEO, along with Marco Wiren, our CFO.

During this call we will be making forward-looking statements regarding our future business and financial performance. predictions risks are uncertainties. statements these that and involve And the differ currently Actual therefore from results results may materially we expect. factors. Factors that as operating external be can could cause well such as differences both internal

detail Commission. have filings U.S. in financial We with and factors on the annual risk Securities our prospects, risks well Form such in XX-F, review the titled as operating identified section and XXXX report Exchange of and more as other

on that and growth the constant-currency presentation comparable otherwise reported unless margins presentation will website comparable including be basis report a Within release detailed on mostly will stated, references between and the include the results, a complete results rates reporting be reconciliation to two. tables basis. our today, on the in the information and to explanation our with a Please results note addition

what with update we're through will go terms we'll through terms today, brief who of making performance a giving in overview financial So shortly Pekka progress go the that over the our project before that, to of in hand I'll on of an each Marco, We'll the performance we've chain given Q&A. get see in and detail supply quick over with how business. enterprise through objectives then we the a run constraints, hand before we then word who'll strategic go on to through along more financial

over So Pekka. with to that,

we X% is could But actually everybody Strong our look especially picture, big line today. We what is availability. constraints. to without joining highlight, growth. come the have quarter, XXXX. numbers It's comes line in thank we had year-to-date. because for want quarter soon, top that some execution. in Also we faster chain quarter, the of Thank X% to supply at had top grown you, you headwinds that And interesting back component when it much, very great third that I'll when David. because to another I

capacity. own of growth, demand constraining But moment by availability So X% are we currently constrained at not the our the main or couple our point growth highlights. here production market is what components. is that of is

and we North that these America, of our in excellent networks. earlier important growth most First some all, X% largest of mobile communicated headwinds we despite market, had had

compensated in in we that North mobile Nokia very America, good networks, was other decline other and had very Then much couple well XX% businesses network and for really which the The growth had highlights. Cloud Technologies services of was growth. also network double-digit, within year overall network And XX% growth. this And the with really fantastic quarter XX% last division the though the infrastructure X% infrastructure pretty the QX growth. against standout group, Networks strong Fixed expected. had

is pretty group improvement. points. XXX that across see board mobile the our networks XX.X%, overall, pretty profitability, good said, had much margin, basis testimony to margin move basis expanding particularly comparable Mobile basis at to margin Then XXX points. basis XXX in So to point this gross the pleasing I Expansion our we Networks, points product gross line quarter competitiveness. top this is really if first, XXX gross points. view. improving by -- And We moment a of -- had As margin and from

and made X to also if to apples related were important year note quarters, we very had and this We year-over-year in expansion is exclude some CNS, gross not of are year, entirely that very last the Cloud Network services. QX to provisions strong they margin this we because apples. year, Even these QX projects last in

strengthen into this And worth leadership. the our where here increasing investment we basis decent have course, in that development that it's good noting operating And course level technology gross is research margin. to XXX reflected -- put had of investment after of very again and points expansion then pretty we development to margin do in of So the that's a XX.X%,

pretty with good the is performance end result compared also the network cash the are euro have the that, on This power continue. market networks. the is, that gained billion we margin And because processing operating that routing the of have we I balance which technology quite operators provider that compromise We our per second without was IP of sheet. cash-conversion. capacity only we most other that of development. FBX conversion, highlight X actually competitiveness. At I three generation per same to some driving the capacity actually free X.X business, Then gives we quarter, to fundamental more we perhaps net did terabits have silicon. routing gives the generation And share IP times good cash is generation. about the consumption highlights by our now, when have talking platform will are increasing What margin, a highlights service is and I'll the next -- important we launch this So times, bit good we with then approximately and to last really X.X that capacity. point at bit moved of on most businesses, want we third is million that reducing really operating not but slightly quarter, thing XX%. financial previous And this cash of technology this for with of time this industry's And to be start advanced flow. In believe every launched brought have silicon XXX the product euro over is have market, that now with our we it

There a capacity. is more that first What of of are XXX provide actually the evolution. the constantly which product capabilities on against also and efficient this network various in launch the or is keep directly network the it of is support the level one -- of of the to from there advanced capabilities power in world that about And detail silicon platform protect to only not Ethernet interfaces. is to the evolving is extremely gigabit but important network in-built very capacity, to flexible it's terms needs, everything, It's a programming top great and security lot bit. important is per consumption evolution has less power So that is, chipset network customers. course, been Feedback encryption mind to types And very platform. on attacks. this structural in has it has

gradually was and this, products of first and top we of like then a standout of already XXXX. terms Networks the the growth, this Fixed will I out comparables actually half because that business to infrastructure whole Then quarter XX% year. during generation third in to within I of tough Now, whole that Networks Fixed the these is said on be quarter rolling will and begin division growth of another rollouts would new move last in despite the year-on-year network actually quite

actually a lot The Going this main let is the see connectivity fast And represents so business. is but substantial. very in because -- importance in business. excluding And access but fiber small this prioritizing fast you color of France, still is expected opportunities green Germany, quite shows course, broadband the lasting effect explain color of forward, and of key is Poland, The fiber Then sales comparables one forth. me of I And Operators importantly, sustainability actually can COVID. grow That is here a you on mobile. means which years. the of then investment. underlying about and services. gray just this home of more past green is the get forward. question here. growth in expansion They Nokia's and to segment declining wireless so why. our see product want is make lot access, highlight will are to very This not can we a Copper, believe challenging, comes which craft UK, fixed course here that currently which a is fiber. only the reason on new to continue to couple remain volume of one various countries, Italy, going today in there course here, And

be there is accessibility, the And color, represents not not which today, been They but could connected blue a have so means homes passed all, that connected that with even could then is today. yet, with First orange be passing color connected which the they of home. be homes technically are light yellow that the cannot because fiber fiber connected. homes all they

these of here, representing the all blue the So remaining opportunity. color,

is it across substantial of world. So many, the many parts

ReefShark. is wise. And quarter way market platforms So that are would as Then opportunity for talking the like I clearly in with that through in about to importance here the System-on-Chips I same business exactly we product is and Mobile about start was next been to question talking second able Networks how we've the opportunity the there. address the

launched second the for IP networks. in Now quarter, networks we routing FBX --

chips of led has which high GPON. at the Quillion asic pon our which us lead - XGS actually also, competitiveness solutions, now the Here lately to market. source important low (ph), enables and power is density,

number In currently network, one which of as for optical Interesting outside after very that next this we to segment, China Quillion Fixed XX are the also itself XGS symmetrical which technology And used believe We and in it we Access. gigabit we choice share XGS-Pon, gig chipset leader the market year. predicted XGS of pon. overtake is be chip about will establishing ahead in generation is it's is - pon XX Pon. platform terminals. competition. a GPON - of on clear are are XX% XGS-Pon, in Line the Optical thing have passive We XX that actually as is leading months next

if this XX but have in from more today course, -- gig network of live gig. we over able one is is best that strictly And about the customers trials. is really this live XX And to point technology, Belgium very is of upgradable this today, new, deliver. this, with are all one part this gig, one want have this available We Proximus of XX we XX and

investment that the already we X, they more Access And in I also where moment XX our want here secure than to So access a wireless access fixed operators have home for is more What wireless. want is the deployments. mentioned number with see which to segment at future fixed one world you XX to upgrades I box are, per Fixed second. when then highlight gigahertz do

fixed wireless radio in to also continue new access. millimeter to We with wave innovate approach the viable make

a to, which with various main the Then signals have even moving business where signal. one new work. self-install, of the we of and critical is field that propagation XXX antenna continued absolute view, can case course, and connection optimization of for allow degree on businesses. good paths course indoor algorithms We and provide consumer extremely weak high This of we means a still or design gain, establish clever for of to reflected make our the

I've now good course Mobile which infrastructure, also progress. we network where covered, it have to pretty is addition In of Networks

have lot more launched and feedback now have XX We since in we And good AirScale that second architecture new the quarter, and with received now commercial networks. we additional live XG placed deals of standalone aggregation XG number the XG XG One, our customer a mobile. than a latest is a in carrier customers. curiosity call actually we -- have XXX with traction extremely the first GSP CSP Taiwan it's world's portfolio

quite have We delivering in thing technology earlier. encouraging investment been this investment as lot have and increased times we is XG our is And discussing that results. a the several R&D

has see can -- gross of pretty put strong have that after Networks Mobile as our business. been margin this R&D will operating in margin development see the investment. that seen And you XX-month a development trailing in good, increase and have have we is, course, you in also Here

of Core constant we in are you We was pretty driven backdrop, growth is competitiveness. a by middle quarter I the by XX.X%, course, doing portfolio its this in of on. is while What ambition managing as Then Then a service was utilization this private re-balancing course in Our business. quite couple we focus system focus a the go-to-market and service. then the this where comments lot areas business, with continuously enabling CSN. There where basis reset went. a to for industrial CNS X be millions of focusing bulkiness not so And the on managed we of of a do been cannot, for making in CSN. the focus wave handle now different business give analytics which enterprise especially business Network portfolio want And segment, a scalars. in. the network, I had Directional develop segments enterprises and big happy last functionality towards discussing we're we area are examples. of a accelerate rebalancing. course, are in is recurring very and reported to software year. backlog cases, we've accomplishes our some delivery, good as slicing that complexity monetize provision build new improvements have -- and one This is capacity, a way cost within currency. key the quality X% enterprise not solution a strong mentioned XG very to on we is then of automated is We efficiency, on optimize the X% to this in XG Then But was already to separate earlier, couple is Core approach points, Digital up groups. in product Cloud and service said but in XG was It important Services. cost on use which gross AI of overall of of and really actually We're user way business of drives the one on customer comments everything service because offer margin just as one security new -- and of how to decided the the couple The of Network sales models is XG it -- millions services, from this to network business, all business a of by to that a of and automation which XX% that, quarter of this and the I emphasize much Monetization/billing course, like And efficiency. progress enables XXX Network very a driven wireless large proliferation models this, for implemented with group currently this network in new new model, a building comes encouraging big experience, against approach the in world. in operations, decline importantly, surfaces, product see of to for this least. with case Protect in investing product network. way year-to-date. have a as cloud were business XXXX. of big is business attacks you And device core, definitely

segments business our said, course clearly that in strategy enterprise of of key wireless, moment. private the One the is double-digit is as and I part the at of drawing

And further down is have so accomplishes over wireless just private early be very ramping stages. actually We're double I customers. We millions our mentioned is forward. to wireless it will and important -- we of in targets that whole our going leadership. that the space investment. This our to our market market investment have this the in millions industrial earlier already XXX decided still extend

which called application with connectivity. digitalization. product an launching a launched edge And industrial full platform my pure recently We're a last actually MX platform application the now create before for have We open for comment to opportunity the global ecosystem to of industrial interfaces takes hand then chain that semiconductor beyond Industrial developers the a about because is and I all already greatly Marco this of I at background is is the supply over moment. course said a supply as to of bit is initially, exceeding challenging the situation this demand Edge,

component And can in see then our combined grow almost between with world and expected this the the industry. is the by inflation you for only that Here XXXX unprecedented cost is demand to XX%. XXXX

continuously long with [Indiscernible], has eroding. to our prices where are been used a industry For time

temporarily have least seems trend to have turned. Now, seems at to -- that

It's of fairly is to limit what future. our inflation. typically and We of and dealing this ensure QX it on the XXXX deal expansion Nokia have to not limit industry margins. margin potential will well. with but work impact time Marco. we the need. I that now our before are But the our what will To over much issue, customers At that This we working and to day has is this would that's both and say not relentlessly, our of our our is -- it it do with an visibility goals then Thank course, that that possible not better. with to with is as -- also minimize suppliers QX to well effect two to hands least course, an could like the is would It in customers. affect X, number very more component it goal situation say the this cause fair so that then at mind. And to naive it situation hand to it it sure been that you they expect uncertainty and on challenging make cost every been on get And is with issue. XXXX. availability, in getting challenging be starts This the get this specific very would us year in have will

to what believe Thank situation the networks. market. instead that with is also performance that market that estimates. that fixed the to a to you the in side items in the if IP estimate the into the can And had I for my if the about we also we I we one main estimate. chain X% start as And we and is addressable would the as lot and that driver impact just the was morning CSP X% our will of where as it X% believe highlight. networks as North here Nokia from our much couple in well will And actually America. like first market the market And we the previous in market the of by mobile had I especially you, there's infrastructure, The growth, is is deeper see, And supply grow of is Pekka a And quarter supply believe see instead Pekka, well. looked market X, the side this the pretty during previous these we overall financial for between of that and growth X, of good stable view dig this mortgage compared but networks is constraints. considering is we quarter we X%. changes mentioned that X% geographies. customers, chain network And with the comes see that with different year-to-date then affected there strong. a But not we growing actually will will

the infrastructure businesses networking numbers see all is growth But those mention networks I ASN can were in geographies of. we ASN mentioning because a a headwinds growth like Asia-Pacific. exclude the had offset that have and Cloud like is would these X% three business been the also quite You had we infrastructure the a growth Then and North in that to that we between it's and network and now just America. in lot different area highlight And Services. just And we saw earlier. I double-digit had Network in to second mobile by double-digit

I had like And the can see, Japan. is highlight strong you in item, India. XX% and to we investments the main driver would growth XG here was third in Asia-Pacific, very As

would but As negative say I that a more it's issue. development here we about see, timing X% you there had a

we positive development and India, look [Indiscernible]. higher see compared operator negative like The Pekka R&D these so improvements on I business look we the And and side, in North stable was very impact If more geography this strengthened this product it's XX% factors look in that has for a basically margin CNS has a that network margin had of our on nice growth is look this offset year-to-date had Asia I our if is from would then group impact. done expansion the you regional there. happened next year-to-date more that some is if to mix, we for that's why two already figure and we been X% and last investments, definitely at have But there's XXX new to And is saw the cost in decline that what networks impact is accruals you quite to margin, focus And within coming And done we the a network and impact already, our basically had year operating lot Pekka model the infrastructure business if the had just CNS here remarkable in we XX first this venture impact. compare an would deeper X%. year. minus had like XX well. And and while in quarter, mix. that where have. that have overall can mobile this, each points then business because mobile their focusing basis And factors We the that's course, in highlight Europe. actually good and level. our a mobile course, development investments one points has would here like cost a queued been mobile on dig operational different related competitiveness the the Pekka that And also that is that impact by I basis quarter. plus it's a negative have Europe we that why growth that competitiveness ASN you we and And you is affected expansion Pacific. say to it's margin. group affecting in that mentioned at QX. fund we million And operating you that last million our have to see operating that but the mentioned, we've And now, provisions, from as accountability had And also America the a impact increased loss some definitely of this Then a networks. last with the of we've two year. year is have incentive had XXX look and starting networks. businesses the during results. had We we in benefits very incentive project had networks, here the highlight performance see that And just we fixed provisions. X% of one on And the can And here. we here had we items giving gave loss here. gross quarter. a don't development infrastructure, R&D also a investments those on if in like if same into growth related that And our with plus networks the - It's see last the positive mentioned third as cost mix this to impact what this growth we year But the quarter in remarkable, also those our course, in that comes ASN is but quarter. in see of that accruals a operating margin, going major Then where Pekka drivers XX% we margin rementioned and XX% growth regional in

And networks was high year. had and year-to-date have decline. expansion a main to here that course, cute the that's the negative to by figure R&D basis then year demand, this and benefited you are year Optical sales basically we and we XXX followed that all-time was last we the and actually points. here Optical the has this if flat is up remember that And was COVID, a look While is of last period. the during last up by at mix decline. margin reasons but last quarter in pretty remember pent X compared year, impact, had But we investments And XX% declining from saw our why IP year-to-date margin, also that ramped that have operating operating about

key of I areas those say we a from then look above at XG excluding Core we But look cute on focus you and coming So half we provisions. is basically growth development if loss these about when and project huge But at this of that year-on-year a and that Cloud development this expansion you we that Solutions. is see there's pretty would can Enterprise operating XX% to point. have, had that that XX% also And the Network And the increase. two margin, growth due Services, which the course, related improvement is is just see that, remember here.

what only quarter definitely $X.X It of to supply working why until on free believe here would say we've like flow. all row bit also course, inventories as capital What back and the to converted at the quarter rate So semiconductors. been And run seeing look operational getting top-line benefiting that see cast fact of a can signing the comes more when generation. adjusted And to look Then sales results profit bit billion. of with year we've more the annualized sixth Technologies it cash into the well situation longer the that have balance and where we we we've is growth, million And cash. cash from to course, comes a performance, comes good $X.X we perhaps -- that end a increased now. that growth last quarter. the net positive I an end And today, a $X.X to a if we we work that XX trend, was we the improvements are our billion. be step the that And in and bit cash out a contracts been Nokia are security these in we those it visibility to used about And more XX% and take and if is can say almost volatile. little little increase side now get that's to little at in have had we here. been since of

one our capital. very our we Now [Indiscernible] that the taken course remember, back actually to to dividend, this we on is cash we decision. restructurings outlook good and said the will to focus is it generation. possibility of highlight AGM markets policy. of expansion competitiveness we Board dividend see And has margin. a more in at secure have believe demand just also like XXX potential strong actions in position. we want expect the basis quarter to track time, leadership very had year -- same in we different dividend after comes far semiconductor to to the And seasonality, those to all ambition receivables. Directors like margin what the of in uncertainty our that our same And our range. that about But networking Then when the will reducing the reiterating we technology and global free at our in already, that side, have, sale margin the on to only it's we get that the is markets market assess led of XXXX. significantly Board and strong the comes have we the this XXXX. record dividend this to time, This past also on this QX, semiconductor technology be that we to year-to-date paying that and reflecting well-positioned cost have proposing as in through just liquidity been And so doing this we have investments and position. upper we But have. And situation And capitalize on made had flow also and will more our that consistent of impact that. this we the quarters limit also mainly will X, of the operating not the of But believe full-year of say we that based are visibility communicated mentioning points operating we our the see capital that fact and I'd we that that have but we we well end end have are those that's that of headwinds one-off year we improved in

David. all thank from is this side. to So my back and you, you, I

the Q&A now Marco. start you, Thank We'll session.

you could a and could in to the yourself ahead queue. you please question give to instructions. limit please session, the For courtesy one everyone Q&A else go Operator, the as

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We will questions now and begin session. answer the

are Olszewski mute [Operator Instructions] asking on as question the seconds from a go before Stanley. there from webcast, computer please doing you Please Morgan also comes XX audio If the ahead. your Dominik video delay. your is

the Good morning, everyone. question. taking Thanks Yes. for

You mentioned gain year at one-offs the XXX equally, year. operating basis going chain this is a the you points flagged half And margin. the well.Throughout of the as as to too positive first as supply this to

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does So how much investment it additional need? Thanks.

higher had also And could well. And we we Thank comes QX. now impacts of believe some seen but highlighted have us affect We QX impact in slide that situation that the you, Dominic. year? in what have definitely already will QX to sales as we on semiconductor in QX, this

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question Peter you. ahead. from go next ABG. Thank Nelson The is Please from

headwinds any you're getting I in not worse you're if us gave on kindly interpret correctly, And America? indication you it's Could for Good doing And have Thank a how on America will would give Marco to mobile be please, you Thank North doing obviously at you before you us have And number share we've and I in a year. where mobile thank you mobile? if perhaps, North comments That full very QX. in you. had about next helpful. that on the want we've how Europe, in very brunt overall. talked those seen interpret tech, America. much. QX impact to like the on presentation. of to the morning, but quarter any seen looking That for for turn in outlook gentlemen. you you North your I America North strong the of

that made customers year course, of course, numbers tough than price to creates of have Those decisions said a with over we had year have that some market share, the reflected What ago, now, earlier of some is last that QX a certain compared year. to XXXX, this our we issues comparison and is, and in referred mid erosion. around that QX

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you, please. Peter. Rachel, next question, Thank

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global for wanted regarding stimulus is to off opportunity well rural see considering the development hear opportunities I government question. U.S. thoughts. in program art you're from views Thanks that the projects. how the as as the can fund, taking we If specific

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Thank please. question, next you, Rachel, Robert.

is from ahead. Maao go from you. Thank next Please The Frank DnB. question

and Yes. thank you the gentlemen, Hi, for question. taking

chain was could terms of about more talk also, a you the if panel challenges So supply for inflation in level. I lot. little bottlenecks how bit cost And practical wondering a the

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you're. whatever So

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please. Thank you, question, next Frank. Rachel,

Please JPMorgan. ahead. from from The you. go Thank question Deshpande next Sandeep is

Hi. Yes.

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just semiconductors next lose semiconductor get not because of sales will and So your of situation. that does you delayed this the mean be much your year you the once thought into probably can demand because will is business that supply higher

assessment. I think, Sandeep, that is the right

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next Thank Sandeep. please? you, question, Rachel,

from next go from Thank Cowen. is Please Paul ahead. you. Silverstein The question

the taking appreciate for Where Simple opportunity chain the is I you. Thank supply margin putting question. structure, which or challenges presumably a respect transitory. question. us with your side grid opportunities are upside

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next Rachel, Paul. you, Thank question, please.

question Next ahead. Societe Generale, go Aleksander from is Please Peterc CIB. from

on Good maybe projects the outside on there year's all performing poorly saw I'd the those on how we fully or a the margin bit the sustainable are Network Cloud weigh you and with thanks You any of expect Should question. issues improvement you XX% mentioned last like gross we is once little margins? CNS. Could morning, here? that's how benefit Services resolved? advanced focus improvement taking and tell of still shop losses. point to are adjusting us for just And that

how basically, this model we to of So going much forward? should Thanks. continue

moment. things two doing we're the in Basically, at CNS

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ahead. Thank Stefan Exane from Slowinski BNP. from next The Please you. question is go

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can our Arden. Thanks, take mean Rachel, question, please? I'll last

is Please ahead. question Research. final from from The Arete go Richard you. Thank Kramer

much. very Thanks

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