(Corrects paragraph 4 to show that Nokia does not expect negotiations to conclude before year-end)
By Mrinmay Dey
(Reuters) -Finnish telecom gear group Nokia on Saturday said it would not meet its financial targets for the year, as it cannot recognize revenue it would make from license renewal discussions that are expected to continue well into the next year.
Nokia said its full-year outlook assumes the closure of outstanding license renewals in Nokia Technologies, its technology unit. It provided no information on what these licenses are and which parties they are in talks with for renewal.
Nokia did not immediately respond to a request for comment.
Nokia said it does not expect negotiations to conclude before year-end with resolution now expected to occur in 2024 and therefore benefit its financial performance next year.
Nokia’s patent portfolio is built on more than 140 billion euros invested in research & development and is composed of around 20,000 patents, including over 5,500 declared essential to 5G. Nokia earlier this year had signed a new long-term patent license agreement with Apple, as the current license between the companies expires at the end of 2023.
Slowing sales of 5G equipment in key markets such as North America have also squeezed profit margins of the company.
Earlier this month, AT&T chose Ericsson to build a telecom network, which took Nokia’s share to a new low. The $14 billion, five-year deal will boost Ericsson’s share in one of the largest telecom players in the world, and erode the presence of rival Nokia in the North American market.
Nokia, which reported a 20% fall in third-quarter sales, said it may not achieve full-year 2023 targets in regard to net sales, comparable operating margin, and free cash flow.
The company said net sales for Nokia’s networks businesses are expected to demonstrate a significant improvement sequentially in the fourth quarter. It is set to report quarterly and full-year results on Jan. 25.
The network equipment maker in October cut up to 14,000 jobs to reduce costs, at that time it did not modify its full-year outlook.
Nokia expected 2023 net sales in the range of 23.2 billion euros ($25.60 billion) to 24.6 billion. It is targeting savings of between 800 million euros and 1.2 billion euros by 2026.
($1 = 0.9061 euros)
(Reporting by Mrinmay Dey in Bengaluru; Editing by Leslie Adler and David Gregorio)