Former rubber boot maker faces hard times

Gold-Rush-Eating-boots-N_54The former rubber boot maker Nokia has seen the net sales of telecoms equipment fall more than expected in the first quarter.

It has warned that earnings in its mainstay business would decline this year due to weakening demand for mobile gear in key markets. In its first unified earnings report since taking control of rival Alcatel-Lucent in January, Nokia also nudged up its cost-cutting target for the merger.

It said that it was seeking savings of “above” $1 billion in the course of 2018, compared with “approximately” a $1 billion previously.

Net sales at the combined networks business dropped eight percent in the first quarter from a year ago to $5.90 billion, Nokia said on Tuesday, missing analysts’ average forecast of $6.28 billion.

Nokia said it expected networks sales in the full year to decline due to weak investing by mobile operators as well as its focus on integrating Alcatel-Lucent.

Chief Executive Rajeev Suri said while our revenue decline was disappointing, the shortfall was largely driven by mobile networks, where the challenging environment is not a surprise.”

First-quarter net sales fell 17 percent in North America, the company’s largest market, while declining 11 percent in the Middle East, 6 percent in Asia-Pacific and 5 percent in China.

It forecast a full-year operating margin of above 7 percent for the networks business, compared with analysts’ average estimate of 9.4 percent and 6.5 percent in the first quarter.

Analysts expect the margin to rise to 11.6 percent by 2018 once the cost cuts from the merger have been completed.

Nokia started the cost-cutting program last month, saying it was planning to axe thousands of jobs worldwide, including 1,400 in Germany and 1,300 in Finland.