Nokia throws more R&D weight behind mobile networks unit

• Mobile Networks business group to invest more heavily in 2021
• The mobile unit will only break even next year as it tries to regain 5G leadership
• Also focusing on getting ahead of rivals on Open RAN and virtual RAN

Ahead of a key strategy presentation by its CEO today, Nokia has unveiled some expectations for its new business units, and while many questions about the company’s plans are yet to be answered, it’s clear that 2021 is going to see a big push by the Mobile Networks unit to regain lost ground in 5G and get ahead of rivals in the Open RAN and virtualized radio access network software market.

CEO Pekka Ludmark is set to provide a more detailed insight into Nokia’s plans for the future at 8:00 EST / 13:00 UK / 14:00 CET today and no doubt much of the focus will be on the strategically critical Mobile Networks business group, which (along with the other units announced at the end of October that will come into effect on 1 January, 2021).

Nokia noted this morning that the “immediate focus [of the mobile networks group] will be on executing its turnaround and regaining 5G leadership,” something it has been striving for during the past couple of years following a disastrous networking component selection that is now steadily being replaced with Nokia’s own chips. “It will focus on leadership in ORAN and vRAN, maintaining scale with CSP customers and growing its enterprise-dedicated Private Wireless Networks business.”

That all makes sense and is as expected, but hold on…

“It is expected to deliver comparable* operating margin of around zero percent in 2021, and significant improvement over the longer term,” where “comparable” excludes certain costs, including restructuring and other unspecified variables.

Zero percent? So the Mobile Networks business group, the largest, will only break even in 2021. Why?

It seems more to do with increasing investment rather than low-ball pricing or chasing loss-leading deals. Lundmark told Bloomberg this morning that Nokia will be ramping up its mobile networking R&D investments and “sacrificing a little bit of the short-term profitability to get to where we want to be in the long term.”

Part of that extra investment looks set to focus on placing Nokia in a prime position to be a key Open RAN partner to the major network operators seeking to introduce disaggregated radio access network elements into their networks in the coming decade, and is the analyst team at Appledore Research are right about how the Open RAN market will shake out, there will be customer relationships and alternative architecture contracts aplenty to win for a traditional supplier such as Nokia. (See Telcos to ramp Open RAN investments with traditional major vendors, predicts Appledore Research.)

Let’s hope there will be further details and insight shed in the strategy presentation, which will need to address a lot of questions about potential unit sales, portfolio focus areas, management roles and more if staff, customers, partners and investors are not going to head into 2021 unsure of what the revamped Nokia will really look like.

In the meantime, you can see what else Nokia has to say about its other upcoming business groups and its position in general in this press release. 

- Ray Le Maistre, Editorial Director, TelecomTV