2023-12-05 09:05:26 ET
Shares of Nokia Oyj (NYSE: NOK) are down 6.0% on Tuesday after the telecommunications company lost a major deal with AT&T Inc (NYSE: T).
Ericsson named the new AT&T supplier
AT&T has partnered with Ericsson for 5G equipment that will cater to 70% of its wireless network traffic in the U.S. by late 2026.
The multinational favoured Ericsson over its Finnish rival primarily to save costs. AT&T will likely spend near $14 billion through the course of the five-year contract.
Note that a JPMorgan analyst downgraded Nokia stock last week to neutral. But Sandeep Deshpande is convinced that the “downside risk is limited” even though he expects the company to fall short of Street estimates in the first half of 2024.
In October, Nokia reported its financial results for the third quarter that missed expectations.
Watch here: https://www.youtube.com/embed/759kobNfXjg?feature=oembedHere’s what it means for Nokia
Deshpande removed his “overweight” rating from Nokia stock recently because it lacks positive catalysts in the near term. Shares of the Espoo-headquartered firm tanked to a three-year low following the AT&T news today.
Nokia now expects the AT&T driven revenue in its mobile networks segment to take a hit in the coming years. That division has typically contributed between 5.0% and 8.0% to its net sales.
It will also now take more than two years for that business to see its operating margin climb into double digits, as per the telecommunications firm.
Nokia does, however, expect the impact of losing AT&T to be partially offset by its previously disclosed plans of cutting 14,000 roles to lower costs. The tech company will remain in business with the U.S. giant in other areas.
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