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Bottom falls out of Nokia's network rump

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Nokia Solutions and Networks (NSN) is facing a 19 per cent drop in sales for the last quarter and an even bigger challenge for the coming 12 months: how to win enough new biz to support a company soon to be shorn of its handset division.

NSN will comprise the majority of the company once the sale of the Finnish giant’s once-proud handset business to Microsoft wins regulatory approval.

However, NSN is predicted to report a 19 per cent drop in Q4 2013 sales to €3.2 billion (£2.6bn) and a 17 per cent slide for the year to €11.4bn (£9.4bn), when its financials come out on Thursday, according to Reuters.

These will follow a 26 per cent fall in Q3 2013 sales.

Having seen large infrastructure projects in South Korea and Japan come to an end, NSN desperately needs some new business to help it grow.

That’s not to say the firm is in dire straits.

A major internal restructuring begun in late 2011 reportedly slashed 25 per cent of its employees from the wage bill and refocused the company on higher margin deals.

That kind of future-proofing has enabled NSN to maintain fairly high operating margins of eight per cent in Q3 and a forecast 12 per cent for the last quarter.

Asia including Greater China accounted for 40 per cent of NSN’s sales in Q3 but it won’t be easy to maintain this in the battle for customers with market leaders Ericsson and Huawei.

The Chinese giant last week boasted of an eight per cent global sales rise in 2013, although it didn’t spin out how much came from carrier network business as opposed to its enterprise and consumer business groups. It also claimed to have deployed 110 of the world’s 244 4G LTE networks.

Ericsson, meanwhile, recently trumpeted a major deal with China Mobile to supply TD-LTE to 15 Chinese provinces.

NSN could find itself with the best chance of sealing a few deals in markets where Chinese network infrastructure firms are de facto blocked for security reasons, such as Australia and the US.

In fact, NSN announced a deal back in October 2013 to provide TD-LTE kit for carrier Sprint across the States. ®

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