Nokia can ride the AI super cycle and get closer to hyperscalers to co-create solutions to drive the future of its Mobile Networks division, CEO Justin Hotard told analysts on a results call.
Hotard has defended the company’s Mobile Networks business as a “unique and highly strategic” asset, answering a question which had portrayed the division as sub-scale and treading water. (The unit returned sales down 13% on Q2 2024, although that 2024 number was inflated by Nokia closing out contracts early with AT&T as the operator removed the supplier from its RAN supplier list.)
Hotard said that this was a market with only four players with global scale, two of whom are de facto not able to partake in western markets. He said that he has heard from customers that there is a clear opportunity to do more with them, and to act as more of a “thoughtful partner”, rather than solely internalising its R&D.
<h4>AI super-cycle</h4>
“I believe the AI super cycle is going to drive a refreshed wave of investment in this space. It’s not there today, but I think we have to have a view over the longer term – whether it’s smart glasses, drones, autonomous vehicles, or innovations that I think we’ll see even in the traditional mobile handset business – there’s going to be a set of innovations that drive opportunity for us and opportunity for our customers.
“And this is where also being a thoughtful partner to our customers is going to be important.”
One area that might afford opportunity is the ability to leverage relationships and technology advances across the business.
Hotard pointed out that in Network Infrastructure – where Nokia sells products into data centres – the market has shifted to cloud and AI driving investment and innovation. That could have a positive knock-on effect into the mobile networks business, including the likely presence of hyperscalers as both customers and partners.
“Whether you think about Ethernet switching speeds or optical technology, what’s happening with pluggables inside the data center, the innovation curve has shifted.
“So by default, our R& D has to be invested in those areas. But it’s not just in that. I think if you look at the hyperscalers and public cloud, they set an expectation for security. They set an expectation for ease of use and deployment of technology and performance.
“And so there’s a number of areas where I think as we’re targeting those customers in Network Infrastructure, we have the opportunity to enable advantages for us across our customer base in that portfolio. And that’s been reconfirmed with some of my customer conversations.”
Although it is in fixed networks and infrastructure where Nokia makes most of its business with hyperscalers – currently contributing about 5% of its overall revenues – Hotard said that many of the cloud players are already partners for Nokia on the mobile side – especially in the core network, where Nokia has moved much more to a cloud-first strategy for the core in terms of the tech stack and where it runs those platforms. That sort of partnership could also extend to the RAN, he added.
Nokia has already made steps to co-create a Cloud RAN solution with AWS, plugging its anyRAN SmartNIC into an AWS RAN server design.
“I think over time we’re going to see some of those things move even into into RAN – and I think we need to be a partner there. So as we think about these partners being broad partners across our business, I think there’s significant opportunity,” Hotard said.
<h4>Functional restructure</h4>
One aspect that might underpin that broad partnership vision is a restructuring of the company’s corporate functions into a centralised capability. Nokia is moving finance, marketing, and legal functions into a consolidated structure that will operate across the business, rather than being anchored within the business units. Hotard said this was about being able to respond to customers more consistently, and he didn’t see any major employment changes being made over and above the company’s 2023 restructuring plan, which is still being accounted for.
The main driver is to be able to we’re unifying our corporate functions to simplify how we work and to build a more cohesive culture to help unlock operating leverage
“The functional changes are that we’re making are really around functional support organisations. I think there’s plenty of companies that have their operating models align functionally like we’re doing. If you look at our organizations, our legal team, compliance and sustainability was actually operating this way already, and the other functions were operating in a slightly different manner. So we’re just driving consistency within the company.”
