Nokia Q3 result exceeds all expectations; net sales of EUR 12.9 billion and EPS of EUR 0.40

Excellent profit margins on handsets of all price ranges

print this

Although expectations for Nokia's result for the third quarter of 2007 were high, the figures, which were released on Thursday, took most observers by surprise. The earnings per share improved by 90 per cent in July-September from the same time last year. EPS stood at EUR 0.40 on net sales of EUR 12,898 million, with operating profit coming in at EUR 1,862 million.
      The operating margin levels of the mobile phones unit were between 22 and 23 per cent, while the market share rose to 39 per cent.
      The result was all the more surprising, in light of the fact that the company did not bring out many new hit models. Instead, it achieved its big profits with models that were introduced earlier in the year.
      More than 1.5 million N95 handsets were sold. Sales were also good in medium-priced handsets, as well as the cheapest phones, costing less than EUR 30 apiece. Nokia managed to maintain a healthy profit margin in models of all price ranges.
      "The improvement of the margins with this product selection was astounding", said Carolina Milanesi, head analyst at Gartner.
     
Comments by Nokia's management suggest that the company expects the positive trend to continue at least through the end of the year.
      New models are expected to do well in the Christmas market, although Nokia has not been making precise numerical forecasts for some time.
      Dark clouds on the horizon are hard to find. There have been some questions about how telecommunications operators will accept Nokia's Internet strategy. A month and a half ago the company introduced the service portal Ovi, which offers a number of services, including a music and games store and a navigation service.
      Some operators reportedly oppose the idea of telephone manufacturers moving in on the service market, and there is even talk of threats to boycott the Nokia's new models.
      Nokia CEO Olli-Pekka Kallasvuo nevertheless insists that relations with the operators are in order.
      "We recently launched the Ovi community with Telefonica, and negotiations on similar types of cooperation are underway with numerous operators around the world", he says.
      Kallasvuo notes that the N81 model, intended for use with Ovi, will be a big item on the European Christmas market, although there had been suspicions that operators would shun it.
      "There is no reason to worry. This gives great opportunities for both sides", Kallasvuo insisted.
      Milanesi of Garner agrees that it would be very unwise for operators to boycott Nokia models.
      "They are what the customers want, and they bring the operators the desired data traffic", she says.
     
Nokia had slight problems in the availability of certain components.
      The component problems of the E90 communicator had a negative effect on the result of Nokia's Enterprise Solutions business group.
      On the problematic US market, Nokia saw its position grow slightly in Q3, with the first increase in market share in a long time. However, Kallasvuo is cautious.
      "These are merely the first steps", he says.
      Expectations were not very high for the recently established Nokia Siemens Networks, which is struggling with a difficult market situation. It was therefore a positive surprise that the company's result, after one-time items, was EUR 110 million in the black.
      Nevertheless, costs of arrangements linked with the merger are rising to EUR 2 billion, with one billion to be included in the result of the final quarter.
      Kallasvuo would not comment on the profit warning issued on Tuesday by Nokia's Swedish rival Ericsson.


Previously in HS International Edition:
  Nokia to buy Navteq in Finland´s largest-ever corporate acquisition (2.10.2007)
  US import ban sought for Nokia phones (24.8.2007)
  Nokia stock buoyant on announcement of new music & games portal and N81 handset (30.8.2007)
  Nokia buys new talent (7.10.2007)
  Nokia seeks 40% market share after posting high quarterly result (3.8.2007)

Links:
  Nokia press release: Nokia reports Q3 2007 net sales of EUR 12.9 billion and EPS of EUR 0.40

Helsingin Sanomat