Nokia price cuts account for fall in profits

Nokia has reported a 20% decline in net profit for the third quarter, due largely to cuts it made in the prices for its mobile...

Nokia has reported a 20% decline in net profit for the third quarter, due largely to cuts it made in the prices for its mobile phones and predicted that earnings would fall again in the fourth quarter.

The world's largest handset maker reported third-quarter net sales of €6.94bn (£3.9bn), up 1% from €6.87bn in the year-ago period.

Net profit fell to €660m from €823m in the third quarter of 2003, the company said.

Net sales from Nokia's mobile phone division dropped 13% year-on-year, to €4.43bn. The company has been battling increased competition in the past year, with rivals improving their handsets and lowering prices.

In contrast, Sony Ericsson, the world's fifth largest handset maker, reported its net income jumped 45% to €90m, compared with the previous year of €62m, driven by demand for mobile phones with cameras. Sales for the London-based company rose to €1.68bn in the third quarter, up from €1.31bn in the third quarter of 2003.

Sony Ericsson, which is a 50-50 joint venture between Japan's Sony and Sweden's Ericsson, shipped 10.7 million units in the period, a sizable jump from the 7.1 million units shipped in the same quarter last year.

Nokia sold a total of 51.4 million mobile devices in the quarter. It estimated that 158 million mobile devices were sold by the industry as a whole, driven mainly by replacements of older handsets in Europe and North America.

Nokia said it was able to claim back some of its recently lost market share, which now stands at 33%, according to its preliminary estimate.

Its share in the first quarter was 32%, and in the second it was 31%. The third-quarter gain came from growth in Western Europe and from holding its market position in China, Nokia said. It conceded that its sales declined significantly in North America and slightly in Latin America.

Nokia's multimedia, networks and enterprise solutions divisions all boosted net sales for the third quarter, the company said.

The multimedia division, which includes its N-Gage portable gaming machines, posted net sales of €914m, almost double the figure from the year earlier. It began selling several new products during the quarter, including a remote camera and wireless GPS module, and a range of wireless Bluetooth headsets and in-car communication kits.

Sales from the networks group grew 21% to €1.47bn, while the enterprise solutions division grew 52%, to €172m.

The company forecast net sales for the fourth quarter of between €8.4bn and €8.6bn. Fourth-quarter net sales for 2003 were €8.8bn.

Laura Rohde writes for IDG News Service

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