Nokia posts Q1 profit, dogged by smartphone concerns

Nokia (NYSE: NOK) reported a sharp rise in profits in the first quarter, another indication that the broader handset market is recovering. However, the world's largest mobile phone maker's earnings missed analysts' estimates, increasing concerns about Nokia's smartphone strategy.

The company reported net income of $465.4 million, up from $162 million in the year-ago quarter. However, that missed analysts' estimates of around $545 million, according to a Bloomberg survey. Nokia recorded net sales of $12.67 billion in the quarter, up 3 percent year-over-year and down 21 percent sequentially. Sales in the company's devices and services business were $8.93 billion, up 8 percent from the first quarter of 2009 and down 19 percent sequentially.

Nokia shipped 107.8 million units in the quarter, up 16 percent from the year-ago quarter and down 15 percent from the fourth quarter. Nokia had 21.5 million smartphone shipments in the quarter, surging up 57 percent from the year-ago period and 3 percent sequentially.

The Finnish firm estimated is total handset market share to be 33 percent, up from 32 percent in the first quarter of 2009 and down from 35 percent in the fourth quarter of 2009. It estimated its smartphone market share to be 41 percent, up from 38 percent in the year-ago period and 40 percent in the fourth quarter. In March, Nokia revised down its global handset market share for 2009 from 38 percent to 34 percent, based on a new methodology for measuring the handset industry. The company said in a filing with the Securities and Exchange Commission the new measurement more clearly outlines new entrants to the mobile phone market.

Despite the smartphone gains, Nokia's average selling price fell to around $82.68, down from $88 in the year-ago period. Nokia attributed the drop to general price erosion across its portfolio. Nokia CEO Olli-Pekka Kallasvuo also acknowledged in a statement that the company continues to "face tough competition with respect to the high end of our mobile device portfolio, as well as challenging market conditions on the infrastructure side."

According to Reuters, which cited data it had seen, Nokia cut phone prices across its portfolio this week--in smartphones, by as much as 10 percent. Nokia spokeswoman Laurie Armstrong said that "price changes are part of our normal, ongoing business" and declined to provide further information.

Reuters also reported that, according to two unnamed sources with direct knowledge of the matter, Nokia delayed the launch of the next version of its Symbian platform, Symbian^3, from the second quarter to the second half of the year. During the company's earnings conference call, Kallasvuo said the Symbian update--which will power many of Nokia's smartphones, and which emphasizes usability and networking--has been delayed because the company wanted to get the release right before moving forward. "We will not ship the product before the quality meets the end user's needs and demands," he said.

The Nokia chief said that several smartphones running on Symbian^3 will announced in the second quarter and shipped in the third quarter. He said that the company will not need to launch Symbian^4 this year because Symbian^3 will be doing the "heavy lifting." Kallasvuo also said that the company is moving ahead on releasing its first MeeGo device--running on software based Nokia's Maemo and Intel's Moblin efforts-- by the end of this year.

Nokia Siemens Networks, the company's infrastructure joint venture, reported sales of $3.6 billion, down 9 percent from the year-ago period and down 25 percent sequentially. The unit had an operating loss of $301.4 million, narrower than the $481 million operating loss it had in the year-ago quarter. The company expects the infrastructure market to be flat this year compared with 2009, and the business is expected to grow faster than the market this year and have an operating margin of break-even to 2 percent.

For more:
- see this FierceWireless Q1 earnings page
- see this release
- see this Reuters article
- see this MarketWatch article

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