Nokia Oyj said it will not be able to meet its annual forecast for sales, operating margin, and free cash flow.
The company clarified that its capabilities do not coincide with the goals that were initially identified as desired results of operations because the license renewal process for the technology unit has not been completed. This is a somewhat insulting case when realistic wishes were not realized due to a lack of forces that were initially assessed as sufficient or, at least, intensively approaching such.
The company expected that the license for the technology unit would be extended in 2023. But the brand failed to do so. In a statement issued by the company at the end of last week, it is noted that intensive negotiations were held between the parties on the issue of extending the deal. Separately, Nokia drew attention to the fact that courts around the world have ruled in its favor.
The company’s statement also declares its intention to prioritize protecting the value of its patent portfolio. The brand is no longer focused on the specific deadlines for renewal of the technology unit license.
In December, Nokia lowered its long-term profitability target. This happened after the loss of a major contract in the United States. The telecommunications provider was not selected by the American company AT&T as a contractor for the construction of 5G networks.
The loss of the contract in the United States has intensified the discussion of Nokia’s competitiveness. The beginning of the 5G cycle has become a kind of missed opportunity period for the company. The brand was unable to conquer the wave of innovation because it did not have competitive sets of microcircuits. Over time, the company improved its position and capabilities, but the external environment turned out to be unfavorable for realizing this potential. Against the background of problems in the macroeconomic space and rising interest rates, there is a tendency to reduce spending on 5G.
The company said that due to the loss of the contract, it will not be able to achieve the goal of double-digit operating profit in the mobile network business over the next two years. Also, the firm still considers an increase in margins after 2026 to be a realistic scenario. The company expects this figure to be at least 14% in two years. If Nokia had been able to sign a contract with AT&T, this goal would have been achieved much earlier.
The company expects that conditions for its mobile networks will remain difficult this year due to the market downturn in 2023 and the changing situation in India after a period of intense growth.
Nokia is set to release results for the fourth quarter of 2023 and the whole of last year on January 25. The company said that the company’s profit forecast has not changed after making adjustments amid the loss of a contract in the United States in December.
Last October, in the US Nokia sued Amazon and HP, accusing these brands of infringing patents related to streaming video. The firm has filed similar lawsuits in the UK, Germany, India, and the European Unified Patent Court. The company expressed hope that patent infringers will acquire licenses, noting its commitment to open negotiations.