UPDATE 2-Hardware supply issues hurt TietoEvry’s sales, software grows

* Q3 sales grow 1% to EUR 648 mln, below estimates

* Adjusted EBITA beats expectations at EUR 94 mln

* Outlook for 2021 maintained

* Hardware sales hit by global chip shortage

* Profits helped by strong software businesses (Recasts, updates shares, adds CEO interview)

By Milla Nissi

Oct 26 (Reuters) – Nordic digital services and software firm TietoEvry reported quarterly revenue slightly below analysts’ expectations on Tuesday after its hardware sales were hit by the global semiconductor shortage.

Chief Executive Kimmo Alkio said the global challenges were visible in Tieto’s hardware resell business, which makes around 100 million euros ($116.38 million) in annual sales, as supply of products such as PCs and laptops dwindled.

Tieto shares were down 2.4% at 1145 GMT.

The Finnish company, which finalised the acquisition of Norway’s Evry in December 2019, said underlying sales grew 1% to 648 million euros in the three months to September 30, below consensus estimate of 656 million in a company-provided poll.

Sales were mainly impacted by a 10% organic decrease in cloud and infra, Tieto’s largest unit which provides services in IT infrastructure and cloud technologies.

The provider of cloud services, software solutions and banking technology had returned to sales growth in the second quarter as demand normalised from last year when revenue streams were hit by the pandemic and contract losses prior to the Evry merger.

Third-quarter adjusted operating profit before amortisation (EBITA) rose 4% to 94 million euros from a year earlier, beating analysts’ 88 million euro estimate.

“Our software businesses had good overall performance, especially Industry Software with organic growth of 10%,” Alkio said in a statement.

Tieto recently announced a new growth strategy focusing on expansion in cloud native, software-centric services through acquisitions, partnerships and optimisation of portfolio.

“Debt reduction following the merger has progressed quite well, so now we have the capacity to gradually start working on acquisitions,” Alkio told Reuters, without elaborating.

“The core of the strategy is growth and expansion: we are making choices we consider the best so that the company grows even faster and more scalably,” he said. ($1 = 0.8593 euros) (Reporting by Milla Nissi in Gdansk; Editing by Christopher Cushing, Uttaresh.V and Mike Harrison)

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