Nokia shares had one of their worst days ever on Thursday after the Finnish telecom equipment supplier reduced its profit outlook to reflect the costs of developing 5G products.

The stock fell more than 24% to $3.87 — the largest drop since 1991 — as Nokia also disclosed in its third-quarter earnings release that it would not be paying a dividend for that quarter and the fourth quarter in part to “guarantee Nokia’s ability to increase 5G investments.”

For the first quarter, the company is now expecting first-quarter margins to negative 3%, below its previous forecast of between minus 2% and plus 2%.

“Some of the risks that we flagged previously related to the initial phase of 5G are now materializing,” Nokia CEO Rajeev Suri said, noting that its third-quarter gross margin was impacted by the “high cost level associated with our first generation 5G products.”

To mitigate these issues over the next year, Suri said Nokia will “increase investment in 5G in order to accelerate product roadmaps and product cost reductions.” He added that he expected earnings to recover in 2021.

But The Financial Times said the reduced guidance “heightened the sense of crisis surrounding Nokia as it struggles to compete with Apple’s iPhone, devices using Google’s Android operating system and low-end Chinese manufacturers.”

“This is all very disappointing,” said Lee Simpson, an analyst at Jefferies. “There is something almost embarrassingly irrelevant about the Nokia story now.”

Nokia said it had delivered a “solid third quarter” with positive free cash flow and widespread sales and that it has now launched 15 live 5G networks with customers including Sprint, Verizon, AT&T, and T-Mobile in the U.S.

Net sales rose 4% to 5.6 billion euros and Nokia made an operating profit of 264 million euros compared to a loss of 54 million euros a year ago.

“As I look to the future, it is clear to me that Nokia has some unique advantages,” Suri said, citing “a powerful, end-to-end portfolio that allows us to benefit from 5G investments across all network domains.”

Photo by Andrej Sokolow/picture alliance via Getty Images

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