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Cheaper phones crimp Nokia profits

North America remains indifferent to company's charms

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Profits were down at global mobile phone giant Nokia yesterday although quarterly sales remained strong.

First quarter financial results for the Finnish giant show net profits stood at €979m, down seven per cent on close to €1.05bn last year.

This is despite a four per cent increase in sales compared to last year with overall turnover reaching just below €9.9bn compared to €9.5bn last year. Nokia said increasing sales of low-end models in emerging markets deflated its unit average selling price (ASP) with the Middle East & Africa, China and Asia-Pacific regions all recording strong year-on-year increases of between 31 and 44 per cent.

The average selling price of Nokia's handsets was €89 - the same as the final quarter of 2006, but down a noticeable 14 per cent from €103 one year ago. Nokia said the decline was slightly offset by improving sales of its high-spec multimedia devices, but still beat forecasts by €1.

In total, Nokia sold 253 million mobile devices during the three months ending 31 March, an 18 per cent increase year-on-year. Nokia is expecting a slight increase in the current quarter, and the company expects the handset market to keep on growing by an estimated 10 percent throughout 2007.

Even so, Nokia executicves will be keeping a close eye on its market share in North America, with handset volumes falling more than 40 per cent to under five million units.

Diluted earnings per share (EPS) stood at €0.25 for the quarter - the same as last year. On Thursday evening Nokia shares rose €0.61 to €18.16 in Helsinki.

Nokia chief executive Olli-Pekka Kallasvuo was pleased with the results, particularly with operating margins at 14.4 per cent compared to 12.9 per cent last year.

"We also saw good year-on-year device volume growth that led to an increase in our market share, further solidifying our number one position in the industry," he said.

"Our Multimedia business group achieved record net sales and operating margin in a seasonally challenging environment. Multimedia continues to lead in the convergence space, with close to eight million Nokia Nseries devices shipped during the quarter, including the ground-breaking Nokia N95 multimedia computer.

"Our Enterprise Solutions business group showed improved results, bolstered by sales of the new Nokia E65, and we are targeting breakeven for Enterprise Solutions in the second quarter 2007.

"Mobile phones mid-range portfolio was strengthened by the Nokia 6300, which began initial shipments in the first quarter."

Kallasvuo also expects the new Nokia Siemens Networks joint venture, which began joint operations on 1 April, to "assume a leading position in the communications infrastructure market".

Analysts are predicting a rake of job cuts in the new joint venture to achieve operational efficiency.

In total, the Espoo, Finland-based company employed just over 68,000 people worldwide on 31 March.

Copyright © 2007, ENN

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