Friday, 09 October 2020 06:56

Nokia gaining most from Huawei absence in US, Europe: Counterpoint

Nokia gaining most from Huawei absence in US, Europe: Counterpoint Courtesy Nokia

Despite being one of the pioneers in the mobile industry, Finnish telecommunications equipment provider Nokia has been struggling in recent years, with its mobile division being much bigger than its other divisions and the company yet to benefit from the 2016 acquisition of Alcatel-Lucent, the technology analyst firm Counterpoint Research claims.

Despite this, Nokia was well-positioned to benefit from the 5G investment spending cycle from communications service providers and would be buoyed by the COVID-19 related bandwidth demands and the move towards converged and multi-use networks, the analyst firm said.

Though all companies in the sector would benefit from the absence of Huawei in the US and European markets, Nokia should gain more as it was an end-to-end supplier like Huawei, Counterpoint said.

But the FInnish company still faced some execution risks in the short term with profits remaining low and margins coming under pressure, it said, adding that Nokia should keep its ReefShark FPGA-to-SoC transition on track and not allow it to be affected the supply chain or other factors.

"This is crucial as it will enable Nokia to better compete on price against its rivals," Counterpoint said. "With Huawei banned from several markets, Nokia must demonstrate that it can increase its RAN market share over the next few months and years in the face of stronger competition from Samsung Networks and open RAN new entrants."

Counterpoint said it was of the view that Nokia looked broadly on track to revive its 5G RAN business in the short term.

“Although the loss of the Verizon contract in the US was clearly disappointing, the company has won several RAN contracts since then, including a major contract to replace Huawei at BT,” said Gareth Owen, associate research director at Counterpoint Research.

“Perhaps just as important — and a pointer to the future — is the fact that Nokia has won several strategic non-RAN contracts from a number of high-profile players during the past few months. These include Apple, Baidu, Tencent, Dish Networks and, most recently, Equinix. I expect these type of contract wins to accelerate over the next year or so.”

With the transition to cloud RAN and the introduction of open RAN, Counterpoint said the mobile industry ecosystem would witness big changes over the next decade, with many new entrants, including small software players and long-established IT leviathans.

This made it necessary for incumbents, like Nokia, to address the challenge and adapt accordingly.

Nokia already has a a strategic review underway and there are likely to be changes in 2021 as the new chief executive, Pekka Lundmark, re-positions the company for the future.

Counterpoint said it believed that Nokia needed to urgently increase R&D investment, especially in 5G, including sorting out any 5G product performance and quality issues.

“Outside its main Networks division, the company should increase focus and investment in its Nokia Software and Nokia Enterprise divisions to benefit from two major trends: the migration to cloud-native software and the Industry 4.0 automation revolution. This should include acquisitions” said Peter Richardson, vice-president of Research at Counterpoint Research.

"In addition, we think Nokia should focus strongly on developing new 5G service-based businesses based on emerging technologies such as network slicing and edge computing in partnership with key CSP and enterprise partners."

But Counterpoint added that finding the funds for this investment would not be easy and Nokia may need to dispose of some assets, perhaps its Technologies division, and also consider other funding and strategic options.

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Sam Varghese

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Sam Varghese has been writing for iTWire since 2006, a year after the site came into existence. For nearly a decade thereafter, he wrote mostly about free and open source software, based on his own use of this genre of software. Since May 2016, he has been writing across many areas of technology. He has been a journalist for nearly 40 years in India (Indian Express and Deccan Herald), the UAE (Khaleej Times) and Australia (Daily Commercial News (now defunct) and The Age). His personal blog is titled Irregular Expression.

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