Having to explain to a jittery financial market that your profits were down 40 per cent requires a degree of nerve and careful PR management. Nokia seems to have achieved the required balance with its share price actually rising nearly two per cent following the announcement of its Q3 results.
Whilst this crash in profits made the headlines, other details buried within the announcement were slipped out by Nokia's CFO, Rick Simonson, that shed light on what challenges the company faces.
- The company would continue to monitor the financial health of its distributors closely but was reluctant to use its balance sheet to support them. "We're not a bank."
- Nokia would look closely at its operating expenses and plans for next year. "It's easier to ramp up spending than it is to cut it."
- The fierce price competition currently seen from its competitors was probably unsustainable. "If vendors don't have low costs like Nokia, or the large scale or distribution power, price cuts are likely to be temporary."
- The company would pay Qualcomm €1.7 billion as part of the patent agreement between the two companies.
- The average cost of a Nokia handset has fallen €10 in the past year, to €72.
- Nokia estimated its share of the mobile market at 38 per cent, slightly down from a 40 per cent share in the second quarter of this year.
- Sales in emerging markets, such as India and Latin America, are coming under increasing pressure indicating that these markets are not decoupled from the global economy.
- While the company believed there would be 1.26 billion devices shipped in 2008, up 10.5 per cent from 1.14 billion in 2007, it declined to provide a forecast for 2009.
Despite these issues, the majority of market analysts were pleased with the company's performance given the deteriorating market. One financial forecast speculated that Nokia's margins would contrast very favourably when compared with results expected very shortly from Sony Ericsson, Samsung Electronics and Motorola.
For more on this story:
- go to the Financial Times, MarketWatch and Electronic Times
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