Nokia quarterly profit halves on weak network sales

Nokia's second-quarter profit fell more sharply than expected as telecom operators around the world spent less on faster mobile networks, prompting the company to lift its cost-cutting target following its merger with Alcatel-Lucent.

Shares in the Finnish telecoms networks provider fell 3.2 percent by 1156 GMT as investors were also unnerved by a softer-than-expected full-year profitability outlook.

Nokia took control of French rival Alcatel-Lucent in a 15.6 billion euro ($17 billion) all-share deal in January to better compete with Sweden's Ericsson and China's Huawei in a market with limited growth prospects, until a fresh cycle of network upgrades begins in around 2020.

"It's a transition year (for Nokia), particularly in the first half ... We believe the total network market is flattish for the full year, but it was clearly weaker in the first half," Chief Executive Rajeev Suri told reporters in a conference call.

Nokia said it now aimed for annual savings of 1.2 billion euros in 2018 following the Alcatel merger, up from a previous goal of more than 900 million euros.

The company did not say what would be the impact on personnel. Nokia began laying off staff in April, and unions have expected up to 15,000 jobs to be slashed globally.

Second-quarter earnings before interest and taxes fell 49 percent to 332 million euros ($370 million), clearly missing a Reuters poll forecast of 400 million euros.

Group sales dropped 11 percent from a year ago to 5.67 billion euros, including a fall in network equipment sales to 5.23 billion, which compared with a market consensus of 5.42 billion euros.

The company said sales of mobile network products were particularly weak. Overall revenue from the networks division - which accounts for more than 90 percent of Nokia's total income - fell in all major geographies and declined by 12 percent both in North America and Europe, its two largest regions. Analysts, however, said that after the Alcatel merger Nokia is in a better position than Ericsson in fixed networks going forward.

Ericsson, which is also cutting costs and has just sacked its chief executive, reported last month its quarterly like-for-like sales in its network unit fell 11 percent from a year ago.