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Nokia's 2 divisions are expected to make €22.7 billion for full-year 2019
(1) Networks €21.2 billion (93%), and
(2) Licensing €1.5 billion (7%)

Total Revenues

Nokia's Business Model

What Need Does It Serve?

Nokia develops network equipment, software, services and licensing globally. It provides mobile telephony, IoT, and digital health services.

Has 2 Operating Segments-

1. Nokia Networks: This generates revenues from a portfolio of products and services that encompass mobile and fixed network access infrastructure, IP routing and optical networks, mobile and converged core networks, as well as software platforms and applications.

2. Nokia Licensing: This segment is focused on licensing Nokia intellectual property, including patents, technologies, and the Nokia brand.

Who Are its Clients?

Nokia primarily sells its hardware to wireless carriers.

The company licenses its patents to handset and chipset vendors.

What Are The Alternatives?

Networks Equipment provider/ Mobile Network provider: Ericsson, Huawei

IP networking and security providers : Juniper Networks, Cisco

Optical Networks & Fixed Access providers: Ciena, Adtran, Calix

Network analytic service and IoT and systems integration: Ericsson, Netcracker, HPE, IBM

Independent Software Vendors: Amdocs, Oracle, Netcracker

What Is The Basis of Competition?

Competition is based on selling high-end networking gear and software to telecommunications companies and internet service providers.

Nokia's Total Revenue has declined 5% from €23.6 million in 2016 to almost €22.6 million in 2018, but is expected to grow slightly to around €22.9 million in 2 years

Total Revenues

Change in Revenues

Competitor Revenue Comparison

Ericsson Change in Revenues

Cisco Change in Revenues

HPE Change in Revenues

Revenue growth of about €300 million over two years to be driven by contribution of about €140 million from (1) Networks division, and about €75 from (2) Licensing divisions

Total Revenues = A + B

Networks Revenues (Nokia Networks)

Licensing Revenues (Nokia Technologies)

Eliminations

Nokia has lost around €1 billion to its revenue over the last two years, largely due to declines in the networks segment.However, we expect the Network revenues to grow slightly and add about €140 million in revenue over the next two years.

(A) Revenue from Networks to increase about €140 million in the next two years, with its share of Total Revenue expected to be about 93% by 2020

Networks Revenues (Nokia Networks) = A + B + C + D

Ultra Broadband Networks Revenue (A)

Global Services Revenue (B)

IP Networks and Applications Revenue (C)

Group common and Other Revenue (D)

(B) Revenue from Licensing to grow slightly in the next two years, with its share of Total Revenue expected to be about 7% by 2020

Licensing Revenues (Nokia Technologies)

Segment revenue grew from €1 billion in 2016 to €1.5 billion in 2018, driven by revenues from patent royalties. These revenues are becoming more meaningful to the company due to their higher margins.We expect revenue to grow slightly in the next two years by 2020. Nokia has expanded its licensing operations to markets including Chinese mobile OEMs, which have been growing their global market share, and customers in the automotive sector. Licensing contributed 7% of total revenue in 2018. This share is expected to remain at similar levels by 2020.

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