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Nokia plunges to €513m loss after Alcatel-Lucent acquisition

Costs mount up at network equipment supplier Nokia following its acquisition of Alcatel-Lucent

Nokia has reported substantial falls in revenues and profits as costs associated with its January 2016 acquisition of Franco-American rival Alcatel-Lucent mounted up.

At the end of its first quarter operating as a combined company, Nokia reported a fall in revenues of 9% year-on-year and 27% sequentially to €5.6bn (£4.4bn).

Operating profit dropped by 73% sequentially, but rose 25% year-on-year, coming in at €345m. The firm made a net loss of €513m.

Nokia said a number of factors relating to the acquisition – notably higher expenses in a number of areas such as selling and administration, as well as research and development – were not helping.

Speaking on a conference call, Nokia CFO Timo Ihamuotila said several large enterprise customers were holding off spending with the firm until they had more clarity around its future roadmap.

Nokia’s poor performance reflected a number of other factors, including a greater than normal seasonal decline in the wider wireless networking market, and a number of divestments from 2015 now being reflected in the accounts.

Nokia has already embarked on a major round of cost-cutting following the acquisition, which will see it reduce its headcount by more than 2,000 by the end of 2018.

Further reductions are being targeted in real estate consolidation, with several sites already shuttered and 30 more for the chop in the next three months, and procurement, where more than 200 contracts are being reviewed. This process will now be sped up, said Nokia CEO Rajeev Suri.

“While integrations of the scale of Alcatel-Lucent are complex and take time, we are sufficiently confident in our progress that we are targeting synergies that are both more than and faster than our original plan,” said Suri.

“We have agreed transition plans that cover the most pressing areas of portfolio overlap with most of our top customers, [and] have begun the process of reducing overlapping personnel,” he added.

Suri said the revenue decline was disappointing, but added that the challenging environment around mobile networks in particular was no surprise, and he had expected to see some market headwinds in 2016.

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