Nokia Oyj Sponsored ADR (NOK.US) focuses on simplified businesses and bets on the hot trend of AI infrastructure.

Nokia Oyj Sponsored ADR (NOK.US) is betting on the artificial intelligence boom by streamlining its business and focusing on the network infrastructure sector for AI data centers. Nokia Oyj Sponsored ADR CEO Justin Horodek stated in an interview before the company's Capital Markets Day event on Wednesday that this move will lead to double-digit profit growth in the coming years. The company announced that by 2028, annual profits are expected to reach between 2.7 billion euros (approximately 3.1 billion US dollars) and 3.2 billion euros. On Wednesday, Nokia Oyj Sponsored ADR's stock price fell by as much as 6.3% on the Helsinki Stock Exchange, marking the fifth consecutive day of decline. Last month, chip giant NVIDIA Corporation agreed to acquire a 10% stake in Nokia Oyj Sponsored ADR for 1 billion US dollars, leading to a significant increase in its stock price. However, concerns about an AI bubble in the market led to some of these gains being reversed. As of the time of writing, the stock was down 5.88% in pre-market trading. The Finnish company plans to sell underperforming business units and restructure its existing four business divisions into two main departments - Mobile Networks and Network Infrastructure. The Network Infrastructure department will mainly cover Nokia Oyj Sponsored ADR's optical networking business, providing the fiber connections needed to support AI workloads for Beijing Vastdata Technology. The Mobile Networks department will include Nokia Oyj Sponsored ADR's mature core business, providing backbone equipment for mobile communications. Horodek stated that this initiative, effective in January next year, will align the company with the opportunities it sees in the field. "We will double down on becoming a focused connectivity infrastructure provider - without seizing the AI opportunity, we can't win in the connectivity business," he said. Nokia Oyj Sponsored ADR was once an iconic mobile brand and Europe's most valuable company, but in recent years it has struggled to convince investors that its core mobile networking business can drive growth. Now, the company is trying to profit from the AI boom, leveraging the connectivity infrastructure that supports this technology, which is worth billions of dollars. In the third quarter, AI and cloud services customers accounted for 6% of the company's net sales revenue, but executives have identified this area as the "greatest opportunity" for the company. The $1 billion deal between Nokia Oyj Sponsored ADR and the world's most valuable company, NVIDIA Corporation, gave the chip giant a 3% stake in Nokia Oyj Sponsored ADR. Last year, Nokia Oyj Sponsored ADR acquired Infinera Corporation to expand its AI data center network product business and hired the former Finnish ambassador to the US to promote defense communication services to governments worldwide. Analysts Matthew Broksham and Kamila Vichnevskaya commented: Nokia Oyj Sponsored ADR's plan to restructure around its Network Infrastructure and Mobile Infrastructure departments eliminates lingering doubts in the market about its commitment to the wireless access market and injects new impetus into its business development. The target of achieving adjusted operating profit of 2.7 billion to 3.2 billion by 2028 is in line with market consensus (2.9 billion). Synergies from mergers and acquisitions and revenue growth in network business will be the driving force, but this target also requires economies of scale in mobile business. The Network Infrastructure department focusing on AI will continue to be led by David Hede. The company expects that selling optical network equipment to tech companies will drive revenue growth for this department. Horodek also stated that its IP switching and routing business will continue to grow, with customers needing to upgrade their fiber access networks. Horodek mentioned that the mobile network business is currently "growing steadily" but will be revamped to focus on AI. Starting January 1, this department will include Nokia Oyj Sponsored ADR's profitable patent department (Nokia Oyj Sponsored ADR Technologies) and its cloud and network services. The head of this business, Raghav Sagal, will become Nokia Oyj Sponsored ADR's Chief Customer Officer. After the departure of executive Tomi Uyto from this department, Horodek will temporarily lead the Mobile Networks department. "Overall, looking at this business, it hasn't produced satisfactory returns - for us, and undoubtedly for shareholders as well," Horodek said. "It's a great core technology, but it hasn't yet become a great business. I think the key is that we need to build better businesses in our portfolio, not necessarily just larger ones." Horodek stated that Nokia Oyj Sponsored ADR's wireless sections of the 5G and 6G networks are facing "challenges" and are currently using NVIDIA Corporation chips to strengthen this part of the business. Nokia Oyj Sponsored ADR's defense business will remain independently operated, with the company describing it as an "incubator." Horodek stated that the company will continue to advance this area of business, leveraging "existing resources in the business portfolio," but expects its revenue to be significantly lower than the other two main departments. Horodek also mentioned plans to sell four small, underperforming assets, such as the 5G WiFi business called "Fixed Wireless Access" and the microwave business that connects base stations to the core network.