Sales Up, Profits Under Pressure At Nokia - InformationWeek

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1/26/2006
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Sales Up, Profits Under Pressure At Nokia

Margins are down, despite a revamped range of models offering more functionality. Part of the reason, Nokia said, was the increasing emphasis on sales of lower cost models in developing countries.

LONDON — Sales at Nokia for the fourth quarter of 2005 held up well, but the world’s biggest mobile phone maker disappointed investors with a fall in fourth-quarter operating profits, blaming lower margins.

Sales for the quarter were 10.3 billion Euros ($12.6 billion), an increase of 9 per cent year-on-year and ahead of market expectations, while net profits were 1.07 billion Euros ($1.3 billion), down by 1 per cent. For the year, sales came in at 34.1 billion Euros ($41.8 billion), up 16 per cent from 2004, while net profits were 3.6 billion Euros ($4.4 billion), up 13 per cent from 2004.

The company forecast growth of over 10 per cent for the mobile device market in 2006 but some further declines in average selling prices, reflecting the increasing impact of emerging markets. It suggested sales in its mobile infrastructure segment would decline in the first quarter of this year, and that the industry as a whole would see only ‘moderate’ growth for the year.

Average selling prices on handsets fell to Euros 99 ($121), down from Euros 102 ($125) in the previous quarter and from Euros 111 ($136) for the fourth quarter of 2004. The ASPs were down despite a revamped range of models offering more functionality. Part of the reason, Nokia said, was the increasing emphasis on sales of lower cost models in developing countries.

The company said its global market share was 34 per cent during the last quarter of 2005, same as a year ago. It sold 84 million mobile phones during the period, an increase of 26 per cent from the previous quarter and an increase of 27 per cent from the previous year.

Nokia said the industry sold 244 million handsets during the quarter.

For the year, Nokia said it expected its market share in mobile devices to be flat or slightly higher in the first quarter, and repeated its forecast for more than 10 percent growth in global phone shipments in 2006, from a revised 795 million in 2005 (an increase of 24 percent during 2005).

Rivals Motorola Inc, Sony Ericsson and Samsung all reported strong demand in the last quarter, with Motorola increasing shipments by 40 percent, mainly due to the success of its RAZR range.

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