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Nokia earnings: Supply disruption hits revenue

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  • Q1 revenue: $5.36 billion (-2.4% YoY, vs. $5.58 billion expected)
  • Q1 earnings: $82 million operating loss (up from -$573 million Q1 2019, in line with expectations)
  • Guidance: The company lowered its 2020 guidance, trimming its earnings-per-share forecasts from $0.27 to $0.25, plus or minus $0.05.

The big number: Nokia said COVID-19 reduced its first-quarter revenue by around $217 million. That was "largely the result of supply issues associated with disruptions in China," CEO Rajeev Suri said.

People are talking: "We are the only foreign supplier in China Unicom for 5G core," Suri told Reuters in an interview released alongside the earnings report.

Opportunities: Like other suppliers of 5G hardware, Nokia remains bullish about the prospects of the technology in 2020, even as the pandemic continues on. The company said it thinks its 5G equipment can propel the company forward throughout the rest of the year. Nokia has been focused on reducing the 5G products' costs, which Suri said is going according to plan.

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Threats: There's still a risk that 5G rollouts might be delayed in the back half of the year. "Some customers may reassess their spending plans," Suri said, adding that the company could also face further supply challenges. "We expect the majority of this COVID-19 impact to be in Q2," he said.

The power struggle: Nokia will be hoping that its Chinese peers aren't as successful overseas as it has been. With national security concerns around Huawei on the rise, Nokia and competitor Ericsson have a chance to usurp Huawei in Europe and the U.S. — but they will only be able to do so if they have competitive products. For now, Nokia said remote working hasn't hampered R&D timelines.
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