Nokia handset sales boom, networks suffer

Nokia boosted its handset sales in the third quarter, maintaining its leading market share, but selling a much higher percentage of lower-end phones, which cut into overall sales figures. Revenues in Nokia’s networks division, however, were static leading to 20% loss in operating profit for that division, but it reported substantial gains in its overall financials.

Across all of its divisions, Nokia today posted Q3 revenues of EUR 8.4 billion ($10.1 billion), up 18% over the EUR $7.1 billion in sales reported in the third quarter of last year. Overall its net profit for the quarter was EUR 881 million ($1.16 billion), up 29% year-over-year, but EUR 87 million of that profit came from the stake of investments and the divestiture of its Tetra digital trunk radio business.

Per usual, Nokia’s handset division returned a majority of its sales, accounting for EUR 5.2 billion ($6.2 billion) in revenues, up 15% from last year’s third quarter, but its operating profit in that division rose only 4% from EUR 848 million to EUR 880 million. Nokia chairman and CEO Jorma Ollila said that new market growth is concentrating in developing markets, where selling prices are lower than in developing markets transitioning to more feature-rich devices. The average handset sale price was EUR 102 ($122), down 5.5% from last year. He also warned that the trend would continue.

“We expect Nokia’s average selling prices in the fourth quarter to decline sequentially,” he said. “This is primarily because mobile device volumes from Latin and North America, where low-end products predominate, are expected to represent a significantly higher proportion of Nokia’s overall device volumes in the fourth quarter, compared with the third quarter.”

Nokia shipped 66.6 million handsets in third quarter, giving it a 33% market share, which is level with its share last quarter and one percentage point higher than its share a year ago. Competitor Motorola continued to make gains, however, reporting earlier this week a growing global handset share of 19%. Most of Nokia’s big gains were in its traditional market Europe and in Asia. It shipped 32.3 million handsets in Europe, Africa and the Middle East, up 30% year-over-year. In China alone, Nokia shipped 8.5 million handsets, up 87% year-over-year, and in the rest of the Asia Pacific region it shipped 12.6 million, up 43% year-over-year.

In North America, however, Nokia is losing its share to newer GSM competitors like Samsung and LG Electronics as well as feeling the effect of Motorola’s resurgence in the GSM market. It shipped 5.8 million handsets in North America, down 13% from last year’s third quarter. Though Nokia saw an increase in shipments to Latin America, from 6.7 million last year to 7.5 million last quarter, Nokia its growth was sluggish compared to other vendors in those fast-expanding markets, leading to a significant decrease in market share.

Nokia’s networks division continued to suffer. It posted EUR 1.6 billion (U.S. $1.9 billion) in revenues for the third quarter, a 2% increase year-over-year, but its operating profit for the division fell 20% from EUR 197 million to EUR 157 million. Network equipment sales in North America and Europe remained stable, and sales in Asia and Latin America improved, but loss of business in one country China had a major impact on revenues, Nokia officials said. Nokia is hoping to rectify that situation with a new joint venture with China Putian, which may act as conduit for Nokia’s UMTS technology into the region.