Nokia, a leading player in the wireless and fixed-network equipment industry, has reported a decline in sales and profit for the last quarter of 2023. The company has attributed these setbacks to operators reducing investments in 5G technology and other advancements due to economic uncertainty.
In the fourth quarter of 2023, Nokia witnessed a net profit of 568 million euros ($619 million), showing a significant drop from the 929 million euros reported during the same period in the previous year. Nokia's net income attributable to shareholders also saw a decline, from 931 million euros in the last quarter of 2022 to 558 million euros in 2023. Furthermore, the company's sales experienced a decline of 23%, falling from 7.5 billion euros to 5.7 billion euros.
Nokia, along with other major players like Ericsson, Huawei, and Samsung, is at the forefront of 5G technology innovation. However, the economic challenges and prevailing uncertainty have led to a change in customer behavior, impacting the entire industry. CEO Pekka Lundmark acknowledged this shift in a statement, emphasizing the influence of the macro-economic environment and high interest rates.
Lundmark further highlighted that some of Nokia's clients, particularly telecom operators, have already made substantial investments in new equipment and do not intend to make additional purchases. This trend has contributed to the decline in Nokia's sales. Looking ahead, Lundmark expects the challenging market environment to persist in the first half of 2024, primarily in the first quarter. However, he remains cautiously optimistic, noting that there are positive signs emerging, such as improved order intake for Nokia's network infrastructure unit.
To adapt to the weak market conditions, Nokia had announced plans in October to cut up to 14,000 jobs as a cost-cutting measure. This decision aimed to enable the company to navigate the sluggish market environment, marked by low economic growth and high interest rates that have prompted clients to put their investments on hold.
Nokia's experience is not unique, as other tech companies, including online retailer eBay, have also resorted to laying off workers due to the challenging economy. Rapid interest rate hikes adopted by central banks worldwide to combat soaring inflation have slowed down the economy. As a result, businesses across various sectors are feeling the impact and making necessary adjustments to mitigate the consequences.
Despite the current challenges, Nokia remains confident in its ability to weather the storm. The company continues to invest in research and development and explore new opportunities to stay competitive in the market. As the economy stabilizes and operators regain confidence in making investments, Nokia is poised to bounce back and capitalize on the growing demand for advanced network technologies.
