Nokia battles smartphone competition as sales rise

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Nokia battles smartphone competition as sales rise

Ian Grant

Nokia has not shaken off the effects of the recession and stronger competition in the smartphone market, despite growing sales and operating profits in the first quarter 2010.

In its report for the first quarter Nokia reported sales of €9.5bn, up 3% year-on-year and down 21% on the fourth quarter 2009. Operating profit rose 60% year-on-year to €820m, but was 44% down on the previous quarter. Operating margin rose to 8.6% from 5.5% a year ago, but slipped from 12.3% in the fourth quarter 2009.

Total shipments of mobile devices rose 16% for the year to 107.8 million, giving Nokia an estimated 33% of the market for the year, less than the 35% it achieved in the fourth quarter 2009.

Reuters published unconfirmed reports that Nokia is fighting back by cutting some smartphone prices by up to 10%.

Nokia shipped 21.5 million converged mobile devices (smartphones and mobile computers), up 57% year-on-year and up 3% on the previous quarter. Last month it launched a cobranded version of its Ovi Store application website in China.

"The consumer response to the inclusion of our walk and drive navigation offering [OviMaps] on our smartphones has been tremendous," said Nokia CEO Olli-Pekka Kallasvuo, with more than 10 million downloads since January.

New sales at the company's networks division, Nokia Siemens Networks, were down 9% year-on-year and down 25% on the previous quarter. Operating margin was positive at 0.6%, up from -4.1% in the first quarter 2009 and down from 5.5% in the fourth quarter 2009.

Kallasvuo said the company continued to face tough competition at the high end of its mobile device portfolio, as well as "challenging market conditions" on the infrastructure side.

He said there were "encouraging results" from the company's focus on helping operators deal with the rapid growth in data and signalling traffic from smartphones, a result of greater use of mobile internet access.

Kallasvuo expects annual industry mobile device volumes to rise 10% on 2009, and expects to hold its market share by volume, but to increase it slightly by value. He expects a flat market for the mobile and fixed infrastructure and related services markets.

Growth in year-on-year net sales, operating profit and EPS
(non-IFRS and reported)
 Non-IFRS first quarter 2010 results (EUR million)  Q1/2010 Q1/2009 YoY change Q4/2009 QoQ change
Net sales 9522 9276 3% 11988 -21%
Devices & Services 6663 6173 8% 8179 -19%
NAVTEQ 189 134 41% 225 -16%
Nokia Siemens Networks 2718 2990 -9% 3625 -25%
Operating profit 820 514 60% 1473 -44%
Devices & Services 804 642 25% 1257 -36%
NAVTEQ 41 5 720% 54 -24%
Nokia Siemens Networks 15 -122 201 -93%
Operating margin 8.6% 5.5%   12.3%
Devices & Services 12.1% 10.4%   15.4%
NAVTEQ 21.7% 3.7%   24.0%
Nokia Siemens Networks 0.6% -4.1%   5.5%
EPS, EUR Diluted 0.14 0.10 40% 0.25 -44%
Reported first quarter 2010 results (EUR million) Q1/2010 Q1/2009 YoY change Q4/2009 QoQ change
Net sales 9522 9 74 3% 11988 -21%
Devices & Services 6663 6173 8% 8179 -19%
NAVTEQ 189 132 43% 225 -16%
Nokia Siemens Networks 2718 2990 -9% 3625 -25%
Operating profit 488 55 787% 1141 -57%
Devices & Services 831 547 52% 1219 -32%
NAVTEQ -77 -120   -56
Nokia Siemens Networks -226 -361   17
Operating margin 5.1% 0.6%   9.5%
Devices & Services 12.5% 8.9%   14.9%
NAVTEQ -40.7% -90.9%   -24.9%
Nokia Siemens Networks -8.3% -12.1%   0.5%
EPS, EUR Diluted 0.09 0.03 200% 0.26 -65%

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