Nokia on Thursday said that it will begin a two-year 600 million euro ($653 million) share buyback this quarter, after reporting that its profit plunged in 2023.
Nokia shares jumped 7% in early trade on Thursday.
One of the world’s largest mobile network equipment makers, Nokia posted fourth-quarter net sales of 5.7 billion euros, a 23% year-on-year decline. Comparable operating profit fell 27% year-on-year to 846 million.
“In 2023 we saw a meaningful shift in customer behavior impacting our industry driven by the macro-economic environment and high interest rates along with customer inventory digestion,” Nokia CEO Pekka Lundmark said in a statement.
Inventory digestion refers to customers, such as telecommunications networks, using gear that they have already bought, rather than purchasing new equipment.
Lundmark said the “challenging environment” of 2023 will continue into 2024.
The company forecast comparable operating profit will reach between 2.3 billion euros and 2.9 billion euros in 2024. Analysts are expecting operating income to sit near 2.4 billion euros in 2024, according to LSEG consensus estimates.
Nokia has been hurt by telecommunications operators cutting back on spending on their networks. India, which has been investing heavily in its next-generation mobile networks over the past couple of years, is beginning to slow down.
Mobile networks, Nokia’s biggest division by revenue, saw sales fall 17% year-on-year to 2.5 billion euros in the fourth quarter.
“In Mobile Networks, we expect top line challenges in 2024 related to a more normalized pace of investment in India and the AT&T decision,” Lundmark said.
The company suffered a massive deal in December, when U.S. mobile carrier AT&T signed a deal with Nokia rival Ericsson to build a new type of 5G network in the U.S. AT&T’s network will rely heavily on Ericsson, rather than on Nokia.
That deal has had an impact on Nokia whose shares have fallen around 25% over the last year.
Lundmark called this a “disappointing development” that “does not reflect the technological competitiveness” of Nokia.
On Thursday, the company said it is now lowering its comparable operating margin target to be achieved by 2026 from at least 14% to at least 13%.
“Nokia still sees a path to achieving the at least 14% comparable operating margin target but considering the current market conditions in Mobile Networks, this was deemed a prudent change,” Nokia said.
The firm’s warnings about the outlook for 2024 come after rival Ericsson also reported a fall in sales and operating profit for the fourth quarter. Ericsson also signaleda challenging 2024 ahead, noting customers cutting spending and investment in India slowing down.