Nokia Reports 66% Drop in Profit

Company predicts global mobile phone volumes will fall by about 10% in 2009

Nokia reported net profit of 380 million euros (US$535 million), a 66% decrease, on July 16. Weak prices and a drop in handset sales were to blame.

"Competition remains intense," chief executive Olli-Pekka Kallasvuo said. "But demand in the overall mobile device market appears to be bottoming out."

The company's share of the worldwide handset market fell to 38%, down from 40% last year, the company said.

The Finnish company sold around 103 million handsets worldwide in the second quarter. Its revenues amounted to 9.9 billion euros, down by nearly 25% from 13.2 billion euros during the same period in 2008. Nokia's operating profit fell by 71% to 427 million euros from a year ago.

In an attempt to boost profitability in January Nokia a restructuring program aiming for 700 million euros savings over the next two years. So far this year, it has announced reduction of about 4,000 employees, including 1,300 voluntary departure packages.

Nokia said the worsening global economic conditions were the key driver behind the drop in profits, citing "weaker consumer and corporate spending, constrained credit availability and currency market volatility" as examples. It also said that global mobile phone volumes would fall by about 10% in 2009 from the level in 2008, and that growth for rest of this year would be flat.

"Nokia now expects its market share in mobile devices to be approximately flat in 2009, compared with 2008," the company said.

The Finnish firm cut the profitability guidance for its devices and service unit, the company's biggest division responsible for handset manufacturing. would be "around the same level as the first half 2009" -- approximately 12%.

Industry watchers said that although the results were "well in-line with market expectations" they were disappointed that Nokia had lowered its profitability target. "A lower margin target in (handset) devices for the second half indicates that there is a price competition ongoing" between mobile phone makers, FIM Bank analyst Michael Schroeder said.

Copyright Agence France-Presse, 2009

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