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Nokia's Earnings Drop 69%, Eyes U.S. Markets

Despite the downturn, the Symbian OS is likely to be an important weapon as Nokia plans to license the software royalty-free through an independent foundation.
The worldwide economic meltdown finally derailed Nokia, sending the company's fourth-quarter earnings down 69% and dropping its dominance of the global handset market to 37%.

In its earnings report Thursday, the handset and mobile services provider said its sales plunged nearly 20% to 12.7 billion euros ($16.4 billion) from 15.8 billion euros. Net profit was $744 million.

Even as its handset market share -- more than its next three competitors combined -- was in decline, the company predicted its market would rise again during the current year. While Nokia said it will continue to build out aggressively in global markets, it added that it will do so with a tightening budget.

"We are taking action to reduce overall costs and to preserve our strong capital structure," Nokia CEO Olli-Pekka Kallasvuo said in a statement. "This is clearly our top priority in the current economic environment. However, it is important for Nokia to continue investing at the proper pace in future growth."

The company said it expects shipments of 2009 handsets to drop 10% from last year's levels, although it expects its market share to increase, particularly in the second half of the year.

Nokia also revealed additional facts and figures on some of last year's major events for the company. The firm revealed it made a one-time payment of 1.7 billion euros to Qualcomm as part of the two companies' licensing agreement. The agreement is for 15 years and covers standards ranging from GSM, EDGE, CDMA, and WCDMA to HSDPA, OFDM, WiMax, and LTE, as well as some additional but unnamed technologies. The companies had been locked in bitter patent litigation for years before they reached a settlement last summer.

Nokia also singled out its Symbian operating system for emphasis, calling it "an important step by Nokia and industry partners" to move toward an open source approach to providing mobile services. The company said it plans to license the OS royalty-free through an independent Symbian Foundation. The OS is likely to be an important weapon as Nokia increasingly targets the U.S. marketplace, which it regards as particularly attractive because it currently has a market share of less than 10%.

The fourth-quarter report also revealed that its summer acquisition of Navteq for $8 billion appears to be off to a strong start. Fourth-quarter Navteq sales increased 31% sequentially to 205 million euros from 156 euros in the previous quarter.

In an indication that Nokia plans to focus on LTE in the future, the company noted that its Nokia Siemens Networks unit was the first infrastructure vendor to ship LTE-compatible base stations. The company pointed out that its Flexi Multimode Base Station can be upgraded to full LTE capability with just a software upgrade. Nokia recently dropped its sole WiMax handset in an indication that it isn't likely to make a major effort in the wide area wireless technology.

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