Wireless Federation

Nokia has improved its outlook for the global mobile handset market this year, now predicting growth of 10 percent or more in device shipments versus a previous forecast for a maximum 10 percent growth. The forecast came with a set of second-quarter results showing the Finnish company’s phone shipments outperforming the market, growing 29 percent year-on-year and 11 percent from Q1, to a total 100.8 million. Nokia estimates the entire market grew 14 percent year-on-year and 3 percent sequentially in Q2. Nokia’s sales for the quarter grew 28 percent from a year ago to EUR 12.6 billion, while operating profit increased 57 percent to EUR 2.4 billion and net profit jumped to EUR 2.8 billion from EUR 1.14 billion. Profits were helped by net one-time gains of EUR 970 million related to the incorporation of the Nokia Siemens Networks joint venture. Nokia also announced that the venture has accelerated its cost-cutting efforts, bringing forward its target for achieving EUR 1.5 billion in annual cost savings to the end of 2008, from 2010 previously. This comes as it retracted a target for a double-digit adjusted operating margin at NSN in its first year of operations. Nokia still expects the telecom network equipment market to show only “very slight growth” this year in euro terms.

The mobile phones division posted sales up 1 percent to EUR 5.9 billion, as volume growth was offset by a drop in the average selling price to EUR 90 from EUR 102 a year earlier. Nokia still expects industry ASPs to decline this year due to a higher proportion of low-end devices. Nokia’s sales were up in all regions in the quarter, apart form the Americas, while Asia-Pacific and the Middle East and Africa showed the strongest growth. Operating profit increased 28 percent to EUR 1.3 billion, as successful high-end products helped the gross margin. Nokia estimates its market share improved to 38 percent from 34 percent a year ago and 36 percent in Q1 and still targets market share gains for the full year.

The multimedia division grew sales 42 percent to EUR 2.7 billion. Shipments of converged devices increased to 13.9 million from 9.0 million a year ago, including 9 million Nseries phones and almost 2 million Eseries devices. Operating profit at multimedia increased 85 percent to EUR 561 million.

Nokia Siemens Networks reported sales of EUR 3.4 billion in its first quarter of operations. While no comparative figures were given, Nokia said sales were negatively impacted by highly aggressive price competition in the sector and customers delaying orders more than expected as the company reorganised its portfolio. The operating loss reached EUR 1.3 billion, including EUR 905 million in restructuring and other one-time charges. In addition to accelerating its previous cost reduction target, NSN plans to implement another EUR 500 million in annual cost reductions. The company targets an improvement in the operating margin, excluding one-time items, in the second half of the year, while extraordinary items will be “significantly less” in the remainder of the year.

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