Last week, at Nokia's analyst meeting in Helsinki, it discussed its achievements and its challenges.  The company’s successes include its traction and product introductions on the enterprise market, its market traction in selling Nokia’s end-to-end portfolio, and its 5G market momentum.  Management reiterated that Nokia has signed 50 5G deals and its products are involved in 16 live 5G network.  The company addresses some of its challenges, as well, including its delays in Systems on Chip (SoC) development progress, its diminished operating margins, competitive challenges in China, and an acknowledgement of increased price competition in the 5G era. We focus our writeup on two main topics: Enterprise and semiconductors.  
 
Enterprise.  The company leads with private LTE in selling to mostly outdoor environments where mobility needs are key.  Nokia calls these networks “private wireless.”  Generally, the target companies are those that are asset-intensive businesses, and Nokia has no current plans to go down-market. Nokia has sold to 120 enterprise customers as of September 2019, up from 80 as of June 2019.

•    24 transportation
•    35 energy
•    32 public sector
•    11 manufacturing
•    18+ other industry

The company announced products specialized for the enterprise market including:

•        Packet core for optimized for enterprise
•        World 1st MulteFire modem (CPE) + LTE unlicensed (USB dongle and US).
•        Industrial terminal portfolio
•        New small form-factor ruggedized field IP-MPLS over LTE routers.  7705 SAR-Hmc

Nokia sees worldwide support for private LTE, including:

•        Vertical spectrum band support.
  •    B43. Germany
  •    B28/38.  France
  •    B31/72.  450 MHz global
  •    B53.  Globalstar footprint.
•        CBRS.  12/19 launch.
•        Japan, Germany, UK will have private spectrum available.

 
Semiconductors.  The company discussed semiconductors at great length at the meeting.  Here is a summary of the main chips that were discussed.

•        PSE-3 shipped for trials. Optical not meeting our margins targets, an issue of scale
•        FP-4 has been shipping for a year and is experiencing widespread adoption.
•        Quillion GPON chip launched a month ago.  It is intended for 5G backhaul.
•        Reefshark RF and baseband SoC.  The set of chips generally known as Reefshark were a big focus at the conference, following announcements made at the company’s 3Q19 earnings call.  The CEO said Nokia’s SoC push could have started earlier and it also said that one chip supplier “dropped the ball” on SoC.  Similar to what was disclosed on the 3Q19 call, the company is increasing its investments in SoC’s to reduce Nokia’s dependence on FPGAs in 5G baseband and RF.  Two main transitions are underway in the FPGA to SoC journey:
  • 5G Massive MIMO RF SoC should roll out during 2020.  These SoCs are already in volume product today and by the end of 2019, radio units using these SoCs will be shipping in significant volumes.
  • 5G baseband SoC available April 2020. 

​Our big takeaway from its recent global analyst meeting was that Nokia is formalizing its enterprise business.  Of course, the company’s primary business, which focuses on telecom service providers, is undergoing major product updates, including towards 5G, Fixed Wireless Access and towards network slicing.  We have published about these topics in other posts relating to Nokia in the past several months, having attended other Nokia events, so we focus on topics we haven’t discussed recently.

The company acknowledges that telco capex is expected to be unexciting and is redoubling efforts to gather enterprise customers.  In 3Q18, Enterprise represented 5% of revenues.  The company expects 8% CAGR for Enterprise Networking.  Of course, the company covered many topics beyond enterprise, including its view on megatrends, the importance of spectrum instead of differentiation between 4G and 5G, residential WiFi and Fixed Wireless Access, its recent wins at major telcos, the impact of the recent re-organization, the impact of the trade war and other topics. 

Enterprise market, Private cellular and WiFi.  The company’s view is that private LTE will challenge WiFi for certain applications in its “strategic” enterprise markets, including for verticals such as logistics and transportation.  Considering the Nokia view, we expect private LTE and WiFi will co-exist in the future.  We think that Nokia can succeed with its private LTE strategy, because this is mostly a “greenfield” opportunity.  Many of the cases Nokia explains it is seeing success are outdoor, not indoor, where WiFi is so popular.  A number of industries are likely to adopt private LTE (mining, logistics are good examples), and later 5G, but we expect most every industry will maintain their reliance on WiFi.  We keep in mind that in light of the fact that 802.11ax (which began shipping 3Q18) incorporates many more cellular-like capabilities, WiFi will have a seat at the table for some time to come even in these critical industries.  Interestingly, by leveraging service provider channels, the company has plans to enter the “branch” enterprise network market, using SD-WAN as its “Trojan horse” to enter.

Megatrends.  From a strategy standpoint, Nokia sees megatrends: Ubiquitous connectivity, multi-cloud, deep analytics, industrial IoT and regulatory.
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Spectrum takes on new importance.  On mobile radio, the company focuses on spectrum differences as much as the difference between 4G and 5G.  The company’s view is all macro basestations should have mmWave.  Describing its 5G ramp, Nokia’s factory capacity related to 5G infrastructure has quadrupled this most recent quarter; and the company “went to volume shipments” on its new, in-house Reefshark chips in 3Q18. 

Residential WiFi and Fixed Wireless Access.  The company’s new mesh WiFi will be made available at its first service provider customer’s stores in the month of November.  This mesh technology is from the recent acquisition of Unium. The company’s first Fixed Wireless Access (FWA) customers have begun deployments, for both 4G cellular and WiGig (60 Ghz 802.11ad).  We understand that the 4G cellular projects are largely at mobile service providers working to leverage existing investments in their mobile infrastructure, while WiGig is in demand at enterprises and traditionally fixed-line service providers. The company expects 5G FWA infrastructure will be ready to ship in 2019.

Recent wins at service providers.  New wins announced €2B around this event include “frame wins” at major Chinese service providers

• China Mobile: radio access, core, passive optical networks, IP routing and optical transport, SDN, network management and professional services.
• China Telecom to improve country-wide 4G LTE coverage and hot spot capacity. Nokia will provide its end-to-end portfolio and solutions for China Telecom including FDD-LTE radio access, home CPE solutions, core routers, multi-service edge routers and optics as well as its services expertise.
• China Unicom deploy technologies across the country including Nokia FDD-LTE radio access, Multi-access Edge Computing, virtualized IMS, SDN, IP routing and optical transport, and fixed network equipment.

The company also emphasized its multi-billion dollar deal recently signed with T-Mobile US.  Neville Ray, CTO of T-Mobile US presented at the event.  Additionally, AT&T’s Chris Penrose, SVP IoT, discussed its relationship with Nokia using the WING service; this is a global IoT service that uses revenue co-sharing between AT&T, Nokia and the many regional service providers in non-AT&T locations.  AT&T made the point that IoT is a business service.  Telia, headquartered in Nokia rival’s Ericsson’s home country, Sweden, made a compelling presentation at the meeting, as well.

The impact of the recent re-organization.  On the day of its recent earnings call, the company announced a planned re-organization, along with some reductions in force, to reduce spending so the company can hit its year 2020 financial targets.  The importance of this re-org, from our standpoint, is that the Software division of the company will be in charge of managing several products that used to be part of the Mobile division beginning Jan 1, 2019.  Products moving from Mobile to Software include IMS CSCF and TAS.  We have verified that Packet Core (including EPC/4G and 5G Core) will remain in the ION (IP and Optical Networks) division, where it has been for years.
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Trade war.  According to Rajeev Suri, CEO of Nokia, Australia, UK, Korea, Japan, possibly Canada all may ban Chinese telecom gear.  Suri expects that Nokia’s “working assumptions” are that: (a) around 20-25% Chinese market share is available for foreign vendors, and (b) potentially, ZTE will take more share in China, and that (c) foreigners (like Nokia) will still be able to play. Suri explained that Nokia hasn’t seen Chinese vendors get more aggressive in Middle East and Africa (MEA).

Keynotes at the NFV World & Zero-Touch Congress in San Jose, California were very interesting today.  We share our observations and view of the main themes from these interesting presentations by Nokia, NEC/Netcracker, Google, CenturyTel.  The main theme of these presentations, we think, is this:  NFV/SDN is now deeply in the deployment and commercial phase, where compared to 3-4 years ago, it was just a concept.  

Nokia.  The company announced that its Airframe server platform, which is an OCP based design, comes available with either embedded acceleration or pluggable acceleration.  This comment includes its software acceleration.  The company explained that its Reefshark chipset can be equipped on the Airframe server and can perform better than a non-accelerated server:

• Layer 1 and 2 offloading - 100% better
• Content acceleration - 30x better
• Machine Learning / video recognition - 10x better
• Crypto acceleration

In explaining functions that an Airframe with Reefshark can perform, the company gave a good example: massive MIMO beamforming can be assisted by the machine learning capabilities.  

NEC/Netcracker.  Enrique Gracia presented several uses cases of the NEC/Netcracker customers that related to NFV/SDN.  He explained that 16 customers have deployed one or more of these uses cases.

Full Stack OSS/BSS/MANO.  A customer deployed this system in 12 weeks to launch a VNF.  The system managed both physical and virtual devices.

Expand to a new territory using VNFs from home region.  A customer now delivers services to a customer outside the home territory by deploying the software and service from the network location at the home location.  In this particular case, NEC/Netcracker and its customer do revenue sharing and VNFs include SD-WAN, virtual firewall and others.  The service provider is expected to expand its customer addressable base by 40%, mainly targeting small/medium businesses in this non-home region.  This system uses MANO, OSS, BSS and the marketplace.  The company says in this case, time to revenue is expected to take 50% less time to deploy new VNFs in the future.

uCPE (Universal Customer Premises Equipment) deployment instead of branded hardware.  The company worked with a service provider company to enable uCPE to be deployed as an alternative to Cisco, Juniper and others' gear. 

Google Cloud.  Vijoy Pandey, who represented Google Cloud, presented on the topic of using AI/ML to reconfigure its data center system.  The company's cloud data center architecture has been evolving continuously since it was first introduced.  Currently, the company is using its own AI/ML system to learn from current network traffic patterns in order to design its future network architecture.  

CenturyTel.  The company has deployed Broadcom based Ethernet switches using its own Network OS.  These switches do their own packet forwarding.  Additionally, the company has built its own orchestration system called VICTOR.  It draws upon Ansible, NetCONF, uses the service logic interpreter from ONAP and uses parts of Open Daylight.  The company plans to open source this development and the spokesperson Adam Dunstan said, perhaps jokingly, that this might be called ONAP-lite.