Since showcasing its basic feature phone and announcing various developments in 5G, Nokia (NOK) is pulling back from the $5.60 level. At a forward P/E of above 15 times, markets prefer to wait before buying more of the stock. Even the dividend yielding over 5.5 percent is not helping the share price. Similarly, Ericsson (ERIC) is range-bound. The Swedish company already forecast challenges ahead in network gear sales.
Nokia’s 3310 phone is an obvious side-project. Emerging markets may still demand regular phones that do not have advanced features. The device may sell millions annually. Low profitability will not encourage shareholders to buy more stock with this phone’s release.
Carriers will implement 5G networks, eventually. The big unknown is when they will do so. Current networks are not overly congested. Consumers may buy unlimited data plans without a 5G back-end. Until more services use IoT (Internet of Things), upgrading to 5G will not happen quickly. In the meantime, Nokia has other contracts to fulfill. On Mar. 30, the company said ALTAN, a Mexican firm, selected it to build and manage an LTE network.
Restructuring
To accelerate the turnaround in Nokia’s mobile business, the company split Mobile in two. One unit will lead product sales while the other will focus on services. Due to 4G installations slowing, cutting down one executive (through Samih Elhage’s exit) will flatten the management structure and improve on the performance for the mobile unit.
