00:00So here's the latest this morning. Nokia announcing a new plan to streamline its business with a focus on AI.
00:05The Nokia CEO, Justin Hotart, saying Nokia changed the world once by connecting people and will again by connecting intelligence.
00:12Justin Hotart joins us now for more. Justin, good morning. Good to see you.
00:15Great to see you, John.
00:16We've got some time with you, so let's take a big step back.
00:18Our generation, of course, knows your company well. Late 90s, early 2000s, handsets.
00:23What do you want it to be in the next few years?
00:25Yeah, I want us to be a company that's known for connecting intelligence and ushering in the AI era.
00:32And here's why. If you think about that time where the world came to know Nokia, it was about connecting people.
00:39That, of course, was the tagline. But it was mobile devices. It was text messaging on a 12-key keypad.
00:45It was calling people anytime, anywhere, calling our friends, our family, our work colleagues.
00:50And, of course, it was about the game Snakes, which I got more messages from when I was announced as CEO.
00:56Absolutely hooked on it.
00:58But then the world changed, and the Internet super cycle came, and it was all about connecting information.
01:05And as mobile devices became not just about calling, they came about applications and data,
01:11Nokia lost out and moved from being a handset provider to being a network provider, an infrastructure provider.
01:18And the reality is, if you look at the telecommunications industry, our primary customer base,
01:23the industry also was slow to capture that transition.
01:26Really, if you think about 2G and 3G mobile communications, they were largely about voice.
01:32Mobile data was coming in, and we were building better voice networks.
01:36So as bandwidth went from, you know, mobile apps to mobile streaming, the industry's been catching up.
01:425G still fairly low penetration when you think about it globally, 35% penetration in the market.
01:49So as we look ahead, we need to start anticipating where the market's going.
01:53And with AI, the market is going to change dramatically.
01:56It's already changing in the data center, which is a part of our business.
02:00You know, we're building AI factories.
02:01Obviously, Jensen talks a lot about this.
02:03I know NVIDIA has earnings later today, but we're connecting data centers to each other and building massive AI factories.
02:09That's using our optical technology.
02:11It's using our IP routing technology.
02:13And where's the future headed?
02:14The future's headed to physical AI, robotics, autonomous vehicles, delivery drones, AR, VR, you know, glasses, more and more devices.
02:23And fundamentally, that means our networks need to change to handle that.
02:26And that's what we're planning for and anticipating to seize that opportunity.
02:29Can you briefly describe the growth opportunity here and how the profile, the growth profile of your company will change as you make this shift?
02:36Yeah.
02:36Look, I mean, today you see the pockets of growth that we have in the fixed infrastructure.
02:41And as we see this build for AI native networks going into mobile, we're going to see tremendous growth there.
02:46It's just not coming in the next few years.
02:48We believe it will come over the longer term as the market invests and builds, but it's not going to be in the next couple of years.
02:54So really think of our business in a couple of ways.
02:57Capturing growth in fixed infrastructure today.
02:59And then in mobile infrastructure, positioning the business for technology innovation and longer term growth as that market picks up.
03:05What industries do you expect to be most dominant in?
03:08Are there particular industries that you think will be fastest to adopt the AI connectivity that you're hoping to provide?
03:15Yeah, I think there's a few things.
03:17First of all, you know, there's no question that the core tech industry that we're in today is the engine of growth, right?
03:24AI and cloud customers, hyperscalers, cloud providers.
03:27And that's, of course, serving the technologies we have today, LLMs, you know, AI agents.
03:31But when we look ahead, I see it being in areas like transport and logistics and manufacturing, physical AI.
03:38Also, an area that we already serve that we call mission-critical enterprises.
03:42Think of public safety, you know, rail, transport.
03:46These are places where AI can add, you know, better reliability, better security, better outcomes for people.
03:53If you think about public safety, for example, emergency services.
03:57And those are areas where I think we'll see faster AI adoption.
04:00But I don't think we can, you know, we can predict the future perfectly.
04:04We need to just anticipate what are the use cases and the needs.
04:07It may be that, you know, delivery drones, other retail applications also accelerate, and those are early users.
04:13So for us, it's about building the plumbing and the core capability that we need.
04:17This is a difficulty for markets right now, this idea that there could be a duration mismatch
04:22between the amount of money people are putting into some of these technologies and when we'll actually see results.
04:27How do you prepare investors for the fact that the investments that you make might not turn a profit
04:33in the same kind of way that they're expecting for two years, three years, five years, even ten years down the line?
04:38Yeah.
04:39First of all, I think this is what's great about our company is that we have all of the assets
04:44to participate in those different duration profiles.
04:47And one of them I didn't talk about yet is actually our technology standards business,
04:51which we're now announcing as a part of mobile infrastructure.
04:54That's a business that does IP licensing.
04:56So that actually has an even longer duration.
04:58So we invest today and we'll see a 10- or 20-year horizon on returns on that business.
05:03And the reality is in technology, we always invest well ahead of these curves.
05:08You know, we're always three to five years ahead.
05:10And the benefit for investors for us is that you're getting the benefit of growth today with what we're seeing in AI and cloud.
05:17And you're seeing us prepare so that you can participate as the growth comes later in mobile.
05:23And ultimately, underneath that is really strong cash flow with our IP licensing business.
05:27Justin, you've seen the pushback in the market.
05:29I'd love some take from you, your reflection on what we've seen over the last few weeks.
05:33There is a worry about overbuild, overcapacity.
05:36And you operate in the physical world.
05:37Are you worried about that?
05:39And how do you position the company to leverage this potential, this opportunity,
05:43without being a big part of a potential bust down the road?
05:46Yeah, I think, John, you said it perfectly.
05:49We need to be disciplined.
05:50And one of the reasons we announced the strategy that we announced today is around being disciplined.
05:55You know, we can't invest in mobile networks assuming that we're going to have growth next year.
05:59The reality is the mobile network providers, the telcos, are largely flat.
06:05They have challenge returns on their capital.
06:07So we have to be disciplined around where we invest, and we have to be incredibly efficient around those investments.
06:12The other side, though, is even if you look, there's a lot of excitement and talk about a bubble.
06:16But even when you go back and look at the internet bubble, the internet bubble, the dot-com bubble, was a couple of years.
06:23And then growth and infrastructure continued.
06:25If you go back and look at the players that won, they were prepared because they were investing through that cycle.
06:30And from an R&D perspective, we have to continue to invest through that cycle.
06:33And honestly, when I look at some of the fundamentals, when I look at the value that AI delivers, the productivity impact, even the productivity impact we're seeing internally in some of our use cases,
06:45and the potential productivity impact for the things we haven't even deployed yet, there's so much ROI.
06:50And I think that's what's a little bit different about this, is that from a business and a productivity perspective, it's much richer than what we saw in dot-com.
06:59Dot-com in the early days was largely a consumer phenomenon.
07:02This is much more about business productivity.
07:05And that's why I think even though we will have periods of digestion, and we may have some players come in and out of the market, all very natural in tech.
07:14By the way, we see this in every cycle.
07:17I think the long-term trends are very, very favorable.
07:20And for us, and certainly as a CEO of a tech company, we need to be looking at the long-term.
07:26And that's why this partnership that we announced a couple weeks ago with NVIDIA is so important.
07:30And certainly, I think Jensen obviously has clear vision for the long-term, but that's why there's so much synergy between us,
07:37because what he's doing and his vision for where this needs to go and our vision for what we need to deliver are just very, very naturally matched.
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