22 April 2010

Nokia First Quarter 2010 - Growth In
Year-On-Year Net Sales, Operating Profit & EPS

As expected, The Finnish mobile phone giant reported today its second-lowest profit in more than a decade for the first quarter as competitors reduce prices in both smartphones and standard handsets.

Nokia reported that its first-quarter profit attributable to equity holders of the parent was EUR 349 million, compared to a profit of EUR 122 million in the year ago quarter. On a per share basis, net profit was EUR 0.09, up from EUR 0.03 in the same quarter last year.

Sales of mobile phones were up by 16% on a year ago at 107.8 million units. Nokia's converged mobile device (smartphone and mobile computer) volumes of 21.5 million units, were up 57% year-on-year and up 3% sequentially. The average selling price (including services revenue) was EUR 62, down from EUR 64 in Q4 2009. The company noted that competitive pressures in the ultra-low to mid-range product price bands, particularly in certain Asian countries, adversely affected its mobile device volumes in the first quarter 2010.

Olli-Pekka Kallasvuo, Nokia's CEO commented: "In Q1, Nokia delivered both year-on-year net sales and operating profit growth. We continue to face tough competition with respect to the high end of our mobile device portfolio, as well as challenging market conditions on the infrastructure side.

During the quarter, we also demonstrated our ability to deliver the Nokia smartphone experience to consumers on a global scale, with our smartphone shipments up by more than 50% year-on-year. The consumer response to the inclusion of our walk and drive navigation offering on our smartphones has been tremendous. Since launching in January, 10 million Nokia smartphone users around the world have downloaded the offering.

In infrastructure, Nokia Siemens Networks' profitability benefited from a positive sales mix in Q1. I am also pleased to see encouraging results from the company's focus on helping operators meet the challenge of the rapid growth in data and signaling traffic from smartphones."

Nokia's first quarter 2010 reported operating profit increased to EUR 488 million, compared with EUR 55 million in the first quarter 2009. Nokia's first quarter 2010 non-IFRS operating profit increased 60% to EUR 820 million, compared with EUR 514 million in the first quarter 2009. Nokia's first quarter 2010 reported operating margin was 5.1% (0.6%). Nokia's first quarter 2010 non-IFRS operating margin was 8.6% (5.5%).

Operating cash flow for the first quarter 2010 was EUR 1.0 billion. The operating cash flow for the first quarter 2009 was EUR 0.3 billion. Total cash and other liquid assets were EUR 9.7 billion at end of the first quarter 2010, compared with EUR 8.1 billion at the end of the first quarter 2009. At the end of the first quarter 2010, Nokia's net debt-equity ratio (gearing) was -31%, compared with -14% at the end of the first quarter 2009.

Nokia is taking measures to mitigate the impact on its business of the disruption to air traffic caused by the spread of ash following the volcanic eruption in Iceland. Measures include adjusting our logistics operation to help ensure component availability and product deliveries to customers. Although the impact on our business is not quantifiable at this stage, it is anticipated that, depending on how long they would need to be in place, the use of alternative logistics arrangements may have an adverse impact on our net sales and profitability going forward.

Volume and Market Share: In the first quarter 2010, the total mobile device volumes of Devices & Services were 107.8 million units, representing an increase of 16% year-on-year and a decrease of 15% sequentially. The overall industry mobile device volumes for the same period were 323 million units based on Nokia's preliminary estimate, representing an increase of 11% year-on-year and a decrease of 10% sequentially. Nokia's preliminary estimated mobile device market share was 33% in the first quarter 2010, up from an estimated 32% in the first quarter 2009 and down from an estimated 35% in the fourth quarter 2009.

As previously announced, beginning in 2010 we revised our definition of the industry mobile device market that we use to estimate industry volumes. This is due to improved measurement processes and tools that enable us to have better visibility to estimate the number of mobile devices sold by certain new entrants in the global mobile device market. We are applying the revised definition and improved measurement processes and tools beginning in 2010, and retrospectively to 2009 for comparative purposes only.

Of the total industry mobile device volumes, converged mobile device industry volumes in the first quarter 2010 increased to 52.6 million units, based on Nokia's preliminary estimate, compared with an estimated 36.0 million units in the first quarter 2009 and 52.4 million units in the fourth quarter 2009. Our own converged mobile device volumes, comprising our smartphones and mobile computers, were 21.5 million units in the first quarter 2010, an increase of 57% compared with 13.7 million units in the first quarter 2009 and 3% compared with 20.8 million units in the fourth quarter 2009. Nokia's preliminary estimated share of the converged mobile device market was 41% in the first quarter 2010, up from an estimated 38% in the first quarter 2009 and an estimated 40% in the fourth quarter 2009.

The following chart sets out our mobile device volumes for the periods indicated, as well as the year-on-year and sequential growth rates, by geographic area.

Nokia's 16% year-on-year increase in global mobile device volumes was primarily driven by an improved demand environment as economic conditions continued to improve in most regions, compared with the difficult economic conditions of the first quarter 2009. This improvement was offset to some extent by lower demand for our mobile devices in some countries in Asia-Pacific and North America. On a sequential basis, Nokia's 15% decline in global mobile device volumes primarily reflected typical seasonal demand weakness in virtually all regions, offset to some extent by strong demand in China during the New Year festive season in the first quarter 2010. Demand was strong for our converged mobile devices in the first quarter 2010. However, competitive pressures in the ultra-low to mid-range product price bands, particularly in certain Asian countries, adversely affected our mobile device volumes in the first quarter 2010.