Nokia Hit By Global Economic Slowdown

A 90% drop in its profits shows economic turmoil is sapping consumer demand for its handsets, but CEO Olli-Pekka Kallasvuo says he's beginning to see signs of stability.

Marin Perez, Contributor

April 16, 2009

2 Min Read

The world's largest cell phone manufacturer is feeling the pain of the global economic slowdown as Nokia reported a 90% drop in profits for the first quarter.

Many industry watchers and companies have been predicting a decline in the mobile market this year because consumers are wary of buying new handsets during an uncertain economic climate. For the first quarter, the cell phone makers reported about $161 million in profits, a steep decline from last year's $1.6 billion for the same time last year. Nokia sold 93.2 million handsets during the period, which is a 19% year-over-year decline.

The company still expects the industry to see about a 10% decline this year, but it expects stability to soon enter the market.

"The market is no longer falling in an uncontrolled manner. I am encouraged by the sign of stabilization seen at the end of the first quarter," Nokia CEO Olli-Pekka Kallasvuo said during a conference call.

The company is still losing ground in the high-end smartphone space as consumers are turning to Apple's iPhone, Research In Motion's BlackBerry, and smartphones from HTC. Nokia is readying some heavy hitters for the second quarter, though, and the touch-screen N97 is expected to be a massive seller around the globe. Additionally, the company's entry-level 5800 XpressMusic smartphone sold 2.6 million units during the first quarter.

Nokia still has about 37% of the overall market, but it has yet to make significant inroads into the U.S. market. Part of the reason for this is that U.S. carriers have more control over the market than foreign carriers, but Nokia is making strides to target U.S. consumers. The company has made more CDMA phones recently, and its E71 smartphone has been picked up by AT&T and marketed at an aggressive price point.

The company also hopes its upcoming over-the-air application store will boost revenue. The Ovi Store will offer users of Series 40 and Series 60 devices an easy way to find, buy, download, and install apps, and it will use social networking and location-based information.

InformationWeek has published an in-depth report on the use of business software on smartphones. Download the report here (registration required).

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