Earnings: Nokia

Largest mobile phone maker Nokia today disappointed the market with worse-than-expected third quarter numbers – lower revenue and a loss after the Finnish firm was affected with one-time charges and impairments of €908 million from its Nokia Siemens Networks.

  • Net income came in at a negative €559 million for the third quarter, down from a €1.09 billion profit last year. This is also much worse than the €347 million net profit expected by analysts.
  • The company reported net sales of €9.8bn, which is 20% lower y/y but only 1% down from the previous quarter. Specifically on the devices and services department, net sales is down 20% y/y to €6.9bn.
  • A little positive news: the company is forecasting a 7% drop in mobile device industry volumes for the year, an improvement from the 10% it forecast previously.
  • Despite growing competition, the firm estimates market share to have stayed at 38% in Q3, the same level it was in Q2 and last year’s Q3.

On the company’s ASP, which had a strong impact on the company’s reported top line:

Our mobile device average selling price (ASP) in the third quarter 2009 was €62, down from €72 in the third quarter 2008 and at the same level as in the second quarter 2009. The year on year decline was primarily due to a higher proportion of sales of lower priced products as well as general price pressure. Sequentially, our ASP benefited from new product shipments, offset however by general price pressure.

In terms of the volume, Nokia lost in all geographic areas it distributes its mobile phones to.  From among Europe, Asia, and America, the company saw the biggest plunge in volume in North and South America, losing 31% and 12%, respectively.

Nokia CEO Kallasvuo said in a statement:

“The demand for mobile devices improved in many markets during Q3. With the average selling price of our devices holding firm quarter-on-quarter, our higher device volumes translated into increased net sales in our Devices & Services business. Our volumes and net sales were, however, somewhat constrained by component shortages we encountered across the portfolio. I also want to highlight the good operating expense management that helped the segment deliver solid earnings.”

Outlook is also slightly more rosy:

  • Nokia expects industry mobile device volumes in the fourth quarter 2009 to be up sequentially.
  • Nokia expects its mobile device market share in the fourth quarter 2009 to be approximately at the same level sequentially.

Few of the things that could improve the firm’s performance for the next year or so are the following: Nokia Money, which allows user to have access the most basic financial services, an alliance with Microsoft to design and market a suite of productivity applications for Nokia’s smartphones; the N900, which delivers computer-grade performance, the Booklet 3G, and the X6, an entertainment device which comes with 32GB of on-board memory.

See more from the official release here.

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