Nokia has outlined a four-part growth strategy that aims to outrun the market, following three years of declining revenues, and a hard-felt structural reorganisation partly involving the Alcatel-Lucent takeover.
The company will put major focus on energy, transportation and public sectors, as well as on “technological extra-large enterprises and webscale”.
The Finnish vendor said it will over-index against overall market growth during the next five years, projecting CAGR of around one per cent for sales in its core markets, and around 13 percent for its adjacent verticals.
At the same time, it will deliver €1.2 billion in cost savings in the period through to the end of 2018, compared with the 2015 running costs of Nokia and Alcatel Lucent as standalone businesses in 2015.
Nokia said it will reassert its buoyancy by putting focus on core sales to telecoms operators and by expanding its supply into parallel ‘vertical’ markets. It will also build its software business, and create new brand licensing agreements in the automotive, consumer electronics and IoT markets.
Rajeev Suri, President and CEO at Nokia, said: “Nokia is extremely well-positioned to win in its primary market with communication service providers, and we aim to target superior returns through focused growth into more attractive adjacent markets where high-performance, end-to-end networks are increasingly in demand.”
He added: “We also see opportunities to renew current patent licensing agreements at favourable terms, add new licensees in the mobile phone area and expand licensing further into new areas such as consumer electronics and the automotive sector.
“Given the appeal to others of our innovations in Networks, virtual reality and digital health, we are confident that we can continue to build our patent and technology licensing business further in the coming years.”
In the shorter term, Nokia said net sales will be down in 2017, in line with a “low single digit percentage decline” in sales in its core market as a whole. It said operating margin in the period would be between eight and 10 percent.
It said net sales related to patent and brand licensing will grow to a run rate of approximately €950 million by the end of 2016.
Of its €1.2 billion cost savings, Nokia said €400 million will be slashed in each of the three years through to the end of 2018. In total, €800 million will come out of operating expenses and €400 million from the cost of sales.
In the short term, the programme will cost the business €1.7 billion to see through, with €700 million recorded in its 2016 accounts, and €800 million and €200 million in the next two years, respectively.
Related restructuring and associated cash outflows are expected to total approximately €2.15 billion, it said, with the majority logged in its 2017 accounts.
It said it will post €900 million of network equipment swaps in total through to the end of 2018, split evenly across the three intervening accounting periods.
Last month Nokia CFO Timo Ihamuotila quit after 15 years with the business, as the Finnish firm’s third quarter results again suffered from falling wireless infrastructure sales, with like-for-like revenues down seven percent to €5.95 billion in the period.