Why Nokia Slumped Badly

After assuring investors that it did not lose the 5G contract with Verizon (NYSE:VZ), Nokia (NYSE:NOK) fell from $5.00 to ~$4.00 last week. Verizon said that Samsung will supply billions worth of 5G equipment, potentially displacing Nokia.

Verizon’s snub of Nokia shocked markets and triggered selling. Nokia defended its supply value to Verizon, which is half-true. Verizon still needs Nokia and Ericsson (NASDAQ:ERIC) as the primary supplier of 5G. The three firms must offer interoperability. Plus, Samsung’s $6.6-billion deal is more of a loss to Huawei than to Nokia.

Nokia’s loss to Samsung is bad news. The company is still cutting costs to boost profit margins. It may have to cut more staff and costs to offset the contract loss. Looking ahead, Nokia has more 5G deal wins to report. In the next quarter, it may post better than expected revenue.

To win back investor trust, Nokia needs to announce supply deals in Europe, North America, and Asia especially. Huawei and ZTE are still pressuring the firm in China, so Nokia must win business there, too. Having hired a new CEO, the firm will probably announce a shake-up that will boost the firm’s efficiency and drive higher sales by geography.

Disclosure: the author owns Nokia stock.