Nokia shares drop the most since 1991 after cutting outlook, suspending dividend
Nokia's shares have plummeted at the market open in Helsinki as the Finnish vendor faces continued turbulence.
The shares dropped 24 percent at the open, the biggest drop since 1991.
Shareholders are spooked after Nokia cut its outlook claiming that increased spending was necessary to compete against rivals.
In a statement, Nokia CEO Rajeev Suri said:
"Some of the risks that we flagged previously related to the initial phase of 5G are now materialising.
We expect that we will be able to progressively mitigate these issues over the course of next year.”
In the meantime, Nokia is suspending its dividends for Q3 and Q4 as it focuses on 5G investments – including developing new products, and making equipment less expensive.
“We do have an issue relating to higher product cost, which is not particularly surprising at this early stage in a new 5G radio cycle,” Suri explained during a call with reporters.
“Those costs typically go down significantly as scale increases and cost optimisation work proceeds.”
Nokia still expects significant earnings from 5G networks in the long-term, but this will be delayed. The company predicts to see a recovery for its earnings in 2021.
Ericsson and Huawei are proving to be fierce competition for Nokia. The latter remains a key rival despite talks in major global markets over whether to ban its 5G equipment due to US-led concerns the company is controlled by Beijing and poses a national security threat.
Huawei's equipment is known for being powerful and cost-effective, making it a prime contender for operators in countries where the vendor is allowed to operate. The uncertainty around Huawei's future has provided an opportunity for Ericsson and Nokia to woo some operators for 5G contracts.
“While I’m not completely satisfied with our current performance, I am confident that our strategy remains the right one,” Suri said.
Nokia says it will resume dividend payments once its net cash is restored to around two billion euros.
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