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Nokia Profits Up - Misses Forecasts
Nokia has reported a first quarter profit of EUR1.22 billion (US$1.95 billion), which while a rise on the EUR979 (US$1.55 billion) from a year earlier was below the average expected by financial analysts of EUR1.38 billion (US$2.2 billion). Net sales were EUR12.7 billion (US$20.15 billion), up 28% year on year (up 35% at constant currency). Nokia's operating margin was 14.7%, up year on year from 13.6% in Q1 2007, down sequentially from 15.9% in Q4 2007, excluding special items.
Chief Executive Officer Olli-Pekka Kallasvuo said: "Nokia had strong profitability in the first quarter, with both operating profit and EPS up significantly year on year. The overall device market developed as expected, with the greatest demand in emerging markets, where our position is very strong. The competitiveness of our product portfolio is reflected in our market share and we target market share gains in the second quarter. The portfolio is renewed on a continuous basis. While we will not have major new products shipping in the second quarter, we expect a number of new products to be shipping, and to have a positive impact on our results, in the second half of 2008."
Nokia expects industry mobile device volumes in the second quarter 2008 to be up slightly sequentially, similar to the market growth in the second quarter 2007, compared to the first quarter 2007. However, the company continues to expect some decline in industry ASPs in 2008, primarily reflecting the increasing impact of the emerging markets and competitive factors in general.
In the first quarter 2008, the total mobile device volume of the Devices & Services group reached 115.5 million units, representing 27% year on year growth and a 13% sequential decrease. The overall industry volume for the same period reached an estimated 295 million units, representing 17% year on year growth and a 12% sequential decrease.
Converged device industry volumes increased to an estimated 33.3 million units, compared with an estimated 23.5 million units in the first quarter 2007. Nokia's own converged device volumes rose to 14.6 million units, compared with 11.8 million units in the first quarter 2007. The company says that it shipped close to 10 million Nokia Nseries and almost 2 million Nokia Eseries devices during the first quarter 2008.
Based on preliminary market estimates, Nokia's market share for the first quarter 2008 was 39%, compared with 36% in the first quarter 2007 and 40% in the fourth quarter 2007.
Nokia Siemens Networks had a first quarter operating loss of EUR74 million (US$117.4 million), with an operating margin of -2.2% (including the net negative impact of EUR 35 million in special items). The reported first quarter 2008 operating loss included a EUR65 million gain due to the transfer of Finnish pension liabilities and a restructuring charge of EUR100 million. The operating margin for the first quarter 2008, excluding these special items, was -1.1%, down from the comparable fourth quarter 2007 operating margin of 1.4%.
The operating profit in the first quarter 2008 also included EUR 120 million of intangible asset amortization and other purchase price accounting related items arising from the formation of Nokia Siemens Networks.
First quarter 2008 operating margin was a positive 2.4%, excluding both the special items and the purchase price accounting related items arising from the formation of Nokia Siemens Networks, down from the comparable fourth quarter 2007 operating margin of 4.3%. Operationally, the main factor for the sequential decline in the operating margin in the first quarter 2008 was the lower sequential net sales, driving higher operating expenses as a percent of net sales. Nokia Siemens Networks continued to be on track to deliver the targeted annual EUR2 billion cost synergy target as previously announced.
Posted to the site on 17th April 2008