At Nokia, Handset Sales Jump But Revamp of Unit Hurts Profit

Monday, October 23, 2006

Nokia Corp.’s net income fell 4.1%, despite a sharp rise in revenue and cellphone shipments, as strong demand for low-end handsets hurt the Finnish company’s profit margins.

Nokia, the world’s largest cellphone maker, said it shipped 88.5 million phones in the third quarter compared with 66.6 million units a year ago. But average selling prices declined to ?93 from ?102 due to an increasing proportion of sales of low-priced phones in emerging markets.

Analysts said the fall in the average selling price was disappointing. “It is the same old Nokia story. Running faster to stand still,” said Sal Oppenheim analyst Nikolas von Stackelberg. Mr. Von Stackelberg said investors want Nokia to show that it can increase sales of high-end phones.

Nokia reported net income of ?845 million ($1.06 billion), or 21 European cents a share, compared with ?881 million, or 20 European cents a share, a year earlier. Nokia’s sales rose 20% to ?10.1 billion from $8.4 billion. Adjusting for exceptional items, Nokia’s group operating margin fell to 12.2% from 12.6% a year ago.

Nokia’s Chief Executive Olli-Pekka Kallasvuo said the strong growth in entry-level phones coupled with a lower percentage of sales in higher-end products impacted Nokia’s margins negatively. “Catering mostly to the emerging markets, our entry-level device business performed extremely well, driven by outstanding volume growth and a solid product portfolio,” he said.

Continue reading “Nokia Shares Drop Despite Strong BOP Sales

Source: Wall Street Journal (link opens in a new window)