Nokia Beats Profit Estimates

April 21, 2011
However market share fell to 29% from 33% in Q1.

Mobile phone maker Nokia's position as world number one looked increasingly threatened on April 21 as its market share shrank further despite better-than-expected quarterly results.

The company's first quarter net profit fell 1.4% to 344 million euros (US$503 million), beating expectations of analysts polled by Dow Jones Newswires for 279 million euros.

Nokia said sales were up 9.1% to 10.4 billion euros.

It was Nokia's first quarterly results since new chief executive Steven Elop said in February that the company, losing ground in the vital smartphone market to iPhone, Blackberry and Google, would abandon its own mobile operating system and start using one designed by Microsoft instead. "In the first quarter, we shifted from defining our strategy to executing our strategy," Elop said in the earnings statement, adding: "I am pleased to report that we signed our definitive agreement with Microsoft."

The former undisputed number one saw its market share fall to 29% from 33% in the first quarter of 2010 and compared with 40% in the first half of 2008.

U.S.-based Strategy Analytics calculated that while Nokia remains the world leader in terms of devices sold, it has slipped behind Apple in wholesale device revenue -- at $9.4 billion compared to Apple's $11.9 billion.

Pohjola Bank analyst Hannu Rauhala also stressed that market share was the key issue. "The first quarter is impacted by the same things that caused their market to fall last year, like the Symbian smartphones losing market share," he said.

Nokia's radical decision to dump Symbian is not expected to bear fruit for at least another year, while the transition period is forecast to be so difficult that both rating agencies Moody's and Standard and Poor's recently downgraded the company's debt and credit ratings in response.

"Market share will come down in every quarter this year because the competitiveness gap between Nokia and its competitors will continue to grow until -- or if -- they get Microsoft Phone into their new product line," said FIM bank analyst Michael Schroeder.

Elop meanwhile insisted phones using Microsoft would be "shipping in volumes in 2012," noting "pressure" to move some products this year.

Nokia said it expected mobile phone revenues to fall from the first quarter's 7.1 billion euros to 6.1-6.6 billion in the next two quarters, followed by a fourth quarter that will only be "seasonally higher."

Part of the coming slump, said Schroeder, was that Nokia's current portfolio of Symbian products, while improving a bit, are falling rapidly behind as rivals develop "at an incredible rate."

Elop said in a conference call that the company saw "no immediate evidence of a change in consumer perception" toward its Symbian products -- but Schroeder felt it was too early to tell.

Other challenges for the next year include a shortage of components due to the earthquake in Japan, Nokia said.

The company also noted that it would not be introducing many new products in the second quarter, instead planning to ship "the majority of our new products in the second half of the year."

The announcement held no details on the number of job cuts which are expected to follow the phase-out of Symbian, with speculation ranging up to ,000 lost jobs, with hundreds or thousands more to go among subcontractors. "Generally, all employees can stay on the payroll through the end of the year," Elop said during the conference call, noting that layoff talks with employees begin next week. At the end of the first quarter, Nokia employed just under 131,000 people worldwide.

Copyright Agence France-Presse, 2011

See Also

Moody's Downgrades Nokia Ratings

Nokia Files New Patent Violation Complaint Against Apple

Nokia Says Events in Japan Will Disrupt Product Supply

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