Nokia gains ground but charge nips profits

Mobile phone company Nokia has reported a slight increase in sales for the second quarter of the year, offset by a steep decline...

Mobile phone company Nokia has reported a slight increase in sales for the second quarter of the year, offset by a steep decline in profit because of a restructuring in its network division.

However, Nokia said it continued to gain market share, aided by the shipment of 13 new models in the quarter, and that it had gained ground in both the US and the global Code Division Multiple Access(CDMA) market, bringing its overall mobile phone market share to 39%.

Net sales for the second quarter, which ended 30 June, came in at €7bn, representing a 1% increase over net sales of €6.9bn for the same quarter a year ago.

Net profit fell 28% to €624m, compared with profit of €862m in the second quarter of last year.

Nokia pinned much of its profit decrease on restructuring charges in the company's networks division. The company took a €399m charge during the second quarter.

Last month, Nokia expected second-quarter sales growth to come in at the low end of its guidance of 4% to 12%, citing the economic downturn in North America and Europe, currency fluctuations and the Sars outbreak.

Yesterday Nokia chairman and chief executive officer Jorma Ollila said that he expected networking sales to be down by between 15% and 20% in 2003.

As the company restructures its network division, it will continue cutting staff, reducing Nokia Networks employees from more than 17,300 to 15,000 by the end of this year.

Ollila said that Nokia is looking at other opportunities, however, and announced a new Nokia Enterprise Solutions group, which will concentrate on providing mobile phones and business applications to companies.

Nokia also expected to reap increased business from the growing Wideband Code Division Multiple Access(WCDMA) market, saying that it expected 20 network providers to launch WCDMA this year. Nokia is expected to supply to at least half of this market, Ollila said.

he also predicted that the mobile phone market would grow 10% for the full year 2003. The company said that it will have introduced a record 35 new model phones in 2003, many with advanced features and capabilities to help supply this demand.

The market for phone replacement in Europe and the Americas continues to be high, Ollila said, and markets such as China and India are grabbing entry-level models.

Nokia is expecting strong profit in the third quarter, although it admitted that sales of Nokia mobile phones were likely to be flat or down year on year during the third quarter.

Scarlet Pruitt writes for IDG News Service

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