Nokia is back and taking a massive punt on the future of connected devices. This was the message from CEO Rajiv Suri on Friday at the telecoms company's first capital market day in five years, but it did little to offset a 4.5 percent plunge in the Finnish telecoms company's shares.
On Friday, the slimmed-down firm upped its 2015 expected operating margin for its networks business to between 8 to 11 percent. The upgrade was widely expected, after Nokia reported operating margin of 11.4 percent in the first nine months of this year, driven by a major project in China as well as high demand for 4G. This led shares to tumble to close 5.5 percent down on the day, as the margin upgrade was already baked into the share price.
The capital day came after Nokia sold its cash-burning "Devices and services" business to Microsoft earlier this year for 5.44 billion euros ($6.78 billion). The company is a different beast to the company that once dominated the mobile handset space and bolstered the Finnish economy—until it fell behind in the rapidly moving smartphone market that Apple and Samsung now control.
Suri outlined Nokia's long-term strategy and said growth lay in the "Internet of Things"—a term used to describe the increasing connectivity of devices—and its "powerful role" in the future.
"The rapidly evolving world of technology provides the context for Nokia's vision and strategy: now it's about connecting things, as well as people," Suri said in a statement on Friday before the capital market day.
"We expect to see more than 50 billion connected things—devices, modules and sensors—by 2025," he added.
Despite the fall-off on Friday, Nokia's stock has rallied over 9 percent year-to-date. While analysts were positive about the turnaround the company has undergone this year, not all are convinced by the short-term prospects because of a reduction in capital expenditure from mobile networks.
Earlier this week, for instance, AT&T said it was cutting capex.
"While management talked positively about 10 years of growth, connecting the internet of things and raised margin guidance for 2015, more cautionary comments about dependency on the capital expenditures of competitors may have taken the shine off the announcement," Simon Maughan, head of research at OTAS Technologies, said in a note.
Highlighting the challenges facing the industry, Nokia's Swedish rival Ericsson said this week that it was embarking on a 9 billion krona ($1.2 billion) cost-cutting program.
Return to handsets?
While Suri is touting the Internet of Things, analysts suggest that Nokia's patents and licensing business, known as Technologies, could be its most lucrative unit. Nokia Technologies saw a 13 percent rise in operating profit in the first nine months of the year, compared to the same time last year.
"As a whole, the key profit driver during the upcoming years will be the technologies unit and licensing business," Mikael Rautanen, technology analyst at Inderes, told CNBC by phone.
Suri ruled out a direct return to the handset market at the investor conference, but said the brand could reappear under license. This would mean Nokia selling their brand to smartphone makers, a move that would be dramatic, according to Rautanen.
"Now they don't have the mobile phone business, the patent portfolio will make good money for the company and this dramatically changes the dynamics of the licensing business," Rautanen said.