Nokia expands its sales of smartphones combined with continuing success in emerging markets

Result clearly exceeds investors’ expectations; Nokia stock up 10% in Helsinki

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As we reported yesterday, the world’s largest mobile phone manufacturer Nokia improved its profitability in the fourth quarter 2009, thanks to cost-cutting measures and growth in the sales of smartphones.
      At the same time, the company reduced the sales and marketing costs in the Devices & Services unit by EUR 185 million compared with Q4/2008. During the same Q4 period Nokia managed to increase the sales of its smartphones by 38%, sending the company’s profit soaring relative to analysts' forecasts.
     
The result clearly exceeded the expectations of investors, pushing the Nokia stock up by 10% in Helsinki. The 5% decline in sales for Q4, measured year-on-year, was caused mainly by the fact that the sales for Nokia Siemens Networks were down by some 16% on Q4/2008.
      According CEO Olli-Pekka Kallasvuo, it is too early to say that the company has beaten the global financial crisis.
      ”The current challenging market conditions are expected to continue all year. One cannot say yet that the world economy has overcome recession. Nevertheless, our operation has gradually improved from a very difficult situation into which we were driven in the first quarter of last year”, Kallasvuo notes.
     
In the fourth quarter 2009, the markets in which Nokia generated the greatest growth in its device sales were China, the Middle East, and Africa. Instead, in North America Nokia has still not managed to increase its sales.
      In Latin America, the total sales revenue of Nokia’s Devices & Services unit declined considerably more than the drop in sales volume of mobile devices.
      Kallasvuo says that in Latin America, the decline in sales was primarily the result of a higher proportion of lower-priced device sales in the period from October to December.
     
The 38% growth in the sales of smartphone units also interrupted the long-time decline of Nokia’s average selling price.
      The sales volume of the Eseries smartphones more than doubled compared with Q4/2008, amounting to 6.1 million devices. However, at the same time the sales volume of the Nseries devices dipped by 43 % to EUR 4.6 million.
     
Both E- and Nseries mobile phones run the Symbian operating system, which the company has begun to use even in its low-end devices.
      ”Symbian can be built on many component alternatives, which constitutes a cost factor, as we can choose the most competitive suppliers. Symbian also makes it possible to introduce new products rapidly in various market areas and to several teleoperators”, Kallasvuo continues.
     
According to Nokia’s estimate, the company’s share in the sales of mobile phones worldwide was 39% at the end of 2009, which is two percentage points higher than that a year earlier.
      Nokia Siemens Networks non-IFRS operating profit amounted to EUR 201 million in the fourth quarter 2009, thus ending the yearlong loss-making cycle. However, this trend is not expected to last.
      It is likely that Nokia Siemens Networks will sustain losses already in the present quarter.
     
In its interim report Nokia expects the non-IFRS operating margin in Nokia Siemens Networks in the first quarter 2010 to be negatively impacted by seasonality and to be below the full year 2010 target, which continues to be breakeven to 2%.
      The Nokia Board of Directors has decided to propose a dividend of EUR 0.40 per share for 2009 - the same as was offered in 2008 on a much better result for the year.
     
In Kallasvuo’s view, the dividend is good, reflecting the good faith the management has in the company’s future.


Previously in HS International Edition:
  Nokia result comfortably exceeds analysts´ forecasts; stock soars 13% in early trading (28.1.2010)
  Nokia sales show recovery (26.1.2010)
  Nokia to introduce free navigation services to boost smartphone sales (22.1.2010)

See also:
  Patent dispute heats up between Nokia and Apple (7.1.2010)

Links:
  Nokia Quarterly and Annual Information 28.1.2010

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