Nokia increases market share, but weaker average selling prices send stock tumbling

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Nokia, the world's largest mobile-phone maker, saw improved market share of around 36 per cent in the third quarter of 2006, but reported a four per cent drop in profit on increased net sales as margins eroded and average selling prices for its handsets fell. The company's stock was traded sharply down in Helsinki on Thursday.
      Nokia sold 88.5 million mobile phone handsets in the period from July to September, more than seven million more than the market had anticipated. Nokia estimated that its market share had grown to around 36 per cent, up from 34 per cent in 2Q/2006.
     
However, neither this nor the fact that net sales were up to EUR 10.1 billion for the quarter was enough to persuade the analysts: they focused on the slightly lower operating profit figure and on the fall in the average selling price (ASP) of Nokia devices, down from EUR 102.00 in the last quarter to EUR 93.00 at the end of September.
      For all the increased net sales, operating profit was down slightly at EUR 1,100 million and this was definitely below expectations. Profitability relative to turnover declined sharply from the 15 per cent recorded in 2Q/2006 to 11 per cent. The quarterly result was also weakened somewhat by a charge of 128 million euros relating to the restructuring of ithe company's CDMA business. In June, Nokia abandoned its plans to develop handsets with Sanyo Electric for networks in North America and Japan.
     
The weaker profitability and reduced ASP figure prompted sellers into the market, and the company's stock took an immediate five per cent hit as the interim results were announced. At the end of trading in Helsinki on Thursday, Nokia shares were down 3.64 per cent on the day.
      The combination of increased sales and lower selling prices is evidence of Nokia's success in selling handsets into developing markets. In Europe and the United States, however, the company's market share declined somewhat. Sales of Nokia mobile phones in Europe were up year-on-year by only 11 per cent, which did not keep pace with the overall growth in this market.
     
Nokia's decline on the Helsinki Exchange pushed the OMX Helsinki Index down by around 1.0. per cent to 9130.74, and the combined OMX Nordic 40 Index fell 0.4 per cent.
      The company's stock was trading slightly higher in Helsinki on Friday morning.


Previously in HS International Edition:
  Nokia surprises markets with improved sales prices of mobile phones (12.4.2006)

Links:
  Nokia Press Release
  OMX The Nordic Exchange

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