Nokia Q1 profits dip; handset prices stabilize

Nokia today managed to stop the freefall of its handset prices in the first quarter, and adjust its business to the global market catering to cheaper phones, but the measures were not enough to stop a 6.6% decline in earnings for the quarter.

Nokia posted profits of 979 million Euros ($1.33 billion) today, down from 1.05 billion Euros in Q1 of 2006, off revenues of 9.86 billion Euros, an increase of 4% over the same period. But Nokia managed to stabilize its average sales price per handset at 89 Euros (U.S. $121), stopping the downward trend in handset pricing that started last year when its average phone price was well over 100 Euros. Nokia also boosted its gross margins (the difference between the cost to make its products and the price they are sold at) for the quarter from 33.1% up from 32.4% in the fourth quarter, signaling to the financial community it is adjusting to the cheaper-phone marketplace it now lives in with so many of its sales in emerging markets.

Across its handset divisions, Nokia shipped 91.1 million units for the quarter, a 21.4 million gain over the last year. Nokia estimated 253 million Q1 handset shipments in all for the industry, an 18% increase year-over-year, but down 13% from the fourth quarter when the holidays give sales a huge boost. Of those global shipments, Nokia estimated it garnered a 36% market share basically the same share it had in the fourth quarter, though up 1 percentage point from a year ago. The small gain in share came as a surprise to many in the industry as Motorola on Wednesday reported its market share plummeted from 23.3% to 17.5% in three months, losses that Nokia in particular was expected to pick up last quarter.

Sales in its core low- to mid-range phone fell from 5.90 billion Euros to 5.58 billion Euros, reflecting its new focus on emerging markets, but the loss was made up for by its multimedia division, which produces its high-end Nseries smartphones. Multimedia sales jumped 28% year-over-year to 2.25 billion Euros, and its much smaller Enterprise group saw a 75% boost in sales to 326 million Euros, though that division is still operating at a loss of 38 million Euros.

Nokia’s Networks group posted its last quarter of results as a wholly Nokia owned entity. On April 1, Nokia Networks merged with Siemens’ networks to create Nokia Siemens. For the first quarter though the separate Nokia Networks reported flat sales at 1.7 billion Euros. Nokia, however, is expected to see a boost in networks as it builds out its portion of Sprint’s new WiMAX network in the U.S., an area of the world where its sales have been declining.