16 April 2009

Nokia's First Quarter 2009:
Market Share and Sales Loss, Profits Drop 90%

Nokia today reported its lowest profit in more than a decade mainly because of fading demand for mobile phones and the global economic slowdown but at the same time its shares surged as analysts had expected an even gloomier report.

The Finnish mobile phone giant said first-quarter net income plummeted 90 percent to EUR122 million (US$161 million), down from EUR1.2 billion in the same period last year.

First-quarter operating profit fell 96 percent to EUR55 million from EUR1.5 billion a year earlier. Sales in the quarter fell 27 percent to EUR9.3 billion.

Still, Nokia sold more phones than some had expected, and its share price jumped more than 11 percent to euro11.30 ($14.91) in Helsinki in late afternoon trading.

"In what has been an exceptionally tough environment, we continue to invest in a focused manner in consumer Internet services delivered across our broad portfolio of mobile devices. Combined, these solutions will drive our future growth." Said Nokia’s CEO Olli-Pekka Kallasvuo.

"As an example in Q1, I am especially pleased with the performance of our first mass market touch product, the Nokia 5800 XpressMusic. Together with Comes With Music, it is a great example of Nokia providing solutions that consumers value.

Regarding the health of the overall mobile device market, the inventory already in the sales channels decreased substantially during Q1 due to extensive destocking by operators and distributors.

This adversely impacted our sales volumes in the quarter. However, it has also resulted in the demand picture becoming more predictable as we enter the second quarter." Kallasvuo added.

"Although their performance was bad, it wasn't as bad as expected," said Neil Mawston from Strategy Analytics in London for Associated Press. "Everyone talked Nokia down, so there was a general relief that things weren't that bad after all."

Nokia sold 93 million mobile phones in the first quarter, down 19 percent from 115 million in the year-ago period. Mawston said the market had been expecting volumes of 90-92 million. "That seems to be the core driver" of the share price, Mawston said.