HELSINKI, July 24 – Finnish telecom equipment group Nokia jumped back into profit in the second quarter, it reported on Thursday, boosted by restructuring after it lost its leading position in handsets and sold its phone division to Microsoft.
The group reported a net profit for the quarter of 2.51 billion euros ($3.38 billion), from a loss of 226 million euros at the same time last year, and surprising the market with an unexpectedly rapid recovery based on network technology.
But sales fell by nearly 7.0 percent to 2.942 billion euros, although this was in line with the overall expectations of analysts polled by Dow Jones Newswires.
The strong turnaround boosted Nokia shares which were showing a gain of 9.0 percent to 6.27 euros in early trading. The overall Finish stock market was ahead by 0.89 percent.
The group is focusing on its information networks expertise and on its data technologies as announced last April, when former Nokia Solutions and Networks head Rajeev Suri was appointed chief executive.
The move coincides with a moment when mobile data traffic is surging as the world’s largest operators are investing in high speed mobile phone equipment.
Suri said Thursday in a statement that the technology networks division “has allowed us to deliver strong profitability while improving our topline trend.”
He said: “Maintaining this balance will remain a clear priority in the second half of the year when we expect networks to return to year on year growth.
“Our expectations for the full year 2014 have improved and we now expect full year underlying profitability for networks to be at our slightly above our long-term target range of 5 to 10 percent.”
Nokia fell rapidly from a leading place in the mobile telephone equipment industry to a straggler after being overtaken by the rise of smartphones.
For Nokia, shifting from mobile phones to networks is just the latest change in the company’s 150-year history, which has seen it redefine itself over the years from a small forestry group to a maker of rubber boots, tyres, cables, electronics, TVs and then mobile phones.
Each time, the company has known when to cut loose loss-making entities and find new avenues to develop.
Nokia’s strategy mirrors that of Swedish competitor Ericsson, which also sold its handset business and is currently focusing on the networks sector.
Suri said that the latest quarterly performance “along with many conversations I have had with customers, partners, employees and others in my first quarter as CEO, gives me a high degree of confidence about our future.”
He also said that free navigation applications for the auto sector, called HERE, were doing well and that the group would continue to invest in this.
The technologies activities of the group raised gross profit by more than 30 percent during the quarter, thanks largely to Microsoft which has become the main owner of the intellectual rights after buying the handsets and services activities.
But on July 17, Microsoft said it would shed 18,000 jobs around the world with the loss of about 1,100 jobs in Finland.
Nokia’s restructuring plan, announced in 2011, has generated heavy charges likely to amount to 2.0 billion euros by the end of this year.
The number of Nokia emoployees at the end of the quarter was nearly 56,500, about 1.0 percent fewer than at the same time last year.