Nokia largely has attributed a 90 per cent fall in Q1 profits to extensive destocking within its international sales channels. This clear-out of old stock caused a significant shortfall in its first-quarter sales volumes, leading to net profits plummeting from €1.22 billion last year to just €122 million in Q1/09.
Hurriedly looking to reassure the markets, Nokia's CEO, Olli-Pekka Kallasvuo, said this destocking could lead to a better Q2, "and has resulted in the demand picture becoming more predictable as we enter the second quarter." This comment was enough to boost the company's share price by nearly 9 per cent, also helped by Nokia's assertion that its handset sales would only decline by 10 per cent this year. Some financial analysts had feared the company would lower its 2009 forecast.
Nokia's CFO, Rick Simonson, gave further hope by claiming there were "nascent signs of relative stability" going into the second quarter, "but it's a little bit too early to call a bottom on demand in the mobile devices business."
However, the company cut its guidance for the fixed line and mobile infrastructure market. It said it expected industry sales by value to fall 10 per cent in 2009, in contrast to its previous forecast of more than 5 per cent. Its own infrastructure business, Nokia Siemens Networks, recorded net sales of €3 billion, down 12 per cent year-on-year and down 31 per cent sequentially.
Commenting on these dire results, Richard Windsor, industry specialist at Nomura Securities, said better-than-expected results at Nokia's handset division had offset weakness at its unit that makes network gear for fixed-line phone and mobile operators. "The initial read is that the bottom of the handset market has passed, while the first cracks are beginning to appear in the demand for fixed and mobile infrastructure," he said.
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