Nokia is preparing for potential disruption from renewed US trade tensions, with its new CEO indicating a possible expansion of American manufacturing to mitigate the impact of potential tariffs.
Despite global profits of the Finnish company taking a hit, its º£½ÇÊÓƵ business has quietly defied the trend – demonstrating steady growth and underscoring the varying fortunes within the firm's key markets, as reported by .
The telecoms equipment manufacturer warned this week that tariffs could reduce its second quarter profits by up to €30m.
The company's overall performance in the first quarter fell short of expectations, with operating profit dropping to €156m – significantly lower than last year's €600m.
A one-off charge of €120m and weaker licensing revenue heavily influenced the results.
However, the situation in the º£½ÇÊÓƵ appears to have been more stable.
Recent filings reveal that Nokia's º£½ÇÊÓƵ revenue increased to £448.9m in 2023, with pre-tax profits rising to £18.5m.
The Bristol-based branch is also set to benefit from avoiding the challenges affecting other parts of the company, putting it ahead of its parent group which announced job cuts impacting up to 14,000 staff last year.
Tariff-driven rebalancing
Newly appointed CEO Justin Hotard stated that Nokia is open to expanding its US manufacturing base to navigate an unpredictable trade environment.
The US market already holds a significant role for the company, accounting for the largest part of its telecoms infrastructure footprint.
"If there are opportunities to strengthen US manufacturing and drive growth, we'll look at that," he stated.
This strategy emerges amidst escalating political chatter in Washington concerning supply chains and the nation's tech resilience.
Hints have been dropped by US regulators that Nokia and Ericsson could be in line for regulatory perks if they boost domestic production.
Nokia currently runs five sites within the US, including facilities in California, but may now need to lean more heavily on this presence to safeguard margins.
Pressure escalates across markets
The backdrop to these decisions is a varied operational landscape.
Network infrastructure saw an 11 per cent year-on-year growth, and cloud services rose by eight per cent, but profits from mobile networks were hit by legacy project costs.
Nokia also finalised its acquisition of US optical networking firm Infinera to enhance scale and hyper-scale market share, which is especially pertinent as demand in data-intensive sectors like AI and cloud reach record highs.
Hotard conceded that the wider economic and political climate could muddy the company's outlook.
"We're not immune to the evolving global trade landscape", he admitted. However, he was adamant that the firm would utilise global manufacturing to minimise disruption.
º£½ÇÊÓƵ remains steady
In the º£½ÇÊÓƵ, Nokia's sustained growth stands out against industry instability.
Its local performance indicates resilience in key European markets, even as broader global uncertainties cast a shadow over the outlook.
The task at hand for Nokia is to harmonise its worldwide operations with the evolving geopolitical landscape, whilst maintaining progress in more stable markets.
The forthcoming quarters will examine if the company can strike a balance between growth in politically sensitive markets and sustained robustness in Europe's more consistent regulatory setting.
