Nokia Oyj Chief Executive Officer Rajeev Suri said the network-equipment maker’s “weak” earnings performance in the first quarter doesn’t risk its planned $17.5 billion acquisition of Alcatel-Lucent SA.
Shares of Nokia, which the Finnish company is using as currency to pay for France’s Alcatel, have lost 14 percent in Helsinki trading since the company reported a profit margin on April 30 that missed analysts’ estimates.
“Some commentators have suggested that our weaker-than-expected Nokia Networks profitability in the first quarter could put the deal at risk -- I do not believe that to be true,” Suri said Tuesday at Nokia’s shareholder meeting in the Finnish capital. “Deals like this are not about one quarter. They’re about what makes sense for the long term.”
Nokia agreed to buy Alcatel last month to transform itself into the biggest maker or equipment that underpins wireless networks. The company is seeking to curb costs and boost research-and-development efforts to become more competitive against China’s Huawei and Sweden’s Ericsson AB.
The adjusted operating margin at Nokia’s networks unit shrank to 3.2 percent last quarter from 9.3 percent a year earlier, showing the Espoo, Finland-based company has its work cut out to reach the midpoint of its long-term target of 8 percent to 11 percent. Suri said Tuesday he is confident the company will achieve full-year goals.
Nokia is also trying to drum up interest in its maps business, known as HERE, for which it’s seeking at least 3 billion euros as it shifts its focus to networks. The company is “not forced” to sell the division, Suri said.
“There is enough interest in the platform because it’s so unique and it is doing so well that we can do a deal on the terms we would like to do the deal at, i.e. at fair market valuation,” he said.
Shares of Nokia fell 1.4 percent to 5.80 euros today. Alcatel declined 0.3 percent to 3.10 euros in Paris.