Nokia's Q2 profit sinks 40% as pressure mounts

Nokia (NYSE:NOK) reported a sharp drop in net profit in the second quarter, with speculation continuing to swirl about the fate of its embattled CEO, Olli-Pekka Kallasvuo.

The Finnish firm reported net profit of $291.9 million, down from $488.7 million in the year-ago quarter. Nokia had warned in June that its financial results were going to be lower than expected. The company--still the world's leader in smartphone and overall handset market share--reported total sales of $12.8 billion, up slightly from the year-ago quarter.

Nokia did not address the speculation about Kallasvuo's job security in its earnings announcement. On Tuesday the Wall Street Journal reported that the company is actively searching for a replacement for Kallasvuo, who has been at the helm since 2006 but has come under pressure for failing to deliver hit high-end smartphones to match Apple's (NASDAQ:AAPL) iPhone, devices running Google's Android platform and others. 

Kallasvuo himself sought to tamp down the speculation. "Obviously there has been a lot of speculation on my position," he said in an interview with CNBC. "This speculation is detrimental. It's not good for Nokia and I feel it needs to be brought to an end one way or the other."

In Nokia's key devices and services unit, sales clocked in at $8.74 billion, up 3 percent from the year-ago quarter and 2 percent from the first quarter. Nokia shipped 111.1 million units in the quarter, up 8 percent year-over-year and 3 percent sequentially. The company said its handset market share was 33 percent in the second quarter, down from an estimated 35 percent a year ago and unchanged from the first quarter.

In the key smartphone category, Nokia said it shipped 24 million units, up 42 percent from the year-ago quarter and 12 percent from the first quarter. However, the company said its smartphone market share stood at 41 percent, unchanged from the year-ago quarter or the first quarter. Nokia plans to release Symbian^3 smartphones in the third quarter, followed by at least one device on its new high-end MeeGo platform before the end of the year.

Kallasvuo said during the company's earnings conference call that Nokia expects to sell 50 million Symbian^3 devices over the platform's lifespan, according to Marketwatch, and operator response to the platform has been strong, according to Reuters. Symbian^3 is expected to be released at the end of the third quarter, and a "family" of Symbian^3 devices will be released in the fourth quarter.

With regard to MeeGo, the open-source operating system that is a combination of Nokia's Maemo platform and Intel's Moblin platform, Kallasvuo said Nokia will focus on the U.S. market, an area where it has historically struggled at the high end. "They (the MeeGo team) have been instructed, one might even use the word ordered, to give priority to the U.S. markets," he said, according to Reuters.   

For Nokia Siemens Networks, the company's infrastructure joint venture with Germany's Siemens, Nokia reported net sales of $3.85 billion, down 5 percent year-on-year and up 12 percent sequentially. The company's operating margin was 1.7 percent, up from 0.1 percent in the second quarter of 2009 and 0.6 percent in the first quarter. Nokia said it continues to believe the infrastructure market will be flat this year compared with 2009, and that NSN will maintain its market share in 2010 rather than grow faster than the market in 2010. Nokia Siemens Networks agreed earlier this week to buy Motorola's (NYSE:MOT) wireless networks business for $1.2 billion, and the deal is expected to close by year-end.

Nokia's stock was up around 4 percent after its earnings announcement, to around $9.20 per share.

For more:
- see this release
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this FT article
- see this MarketWatch article
- see this Reuters article
- see this FierceWireless Q2 earnings page

Related Articles:
Report: Nokia is hunting for CEO Kallasvuo's replacement
Nokia cuts Q2 forecast on smartphone, margin concerns
Nokia shakes up management structure yet again
Nokia releases flagship Symbian^3 smartphone, the N8
Nokia CEO pledges to 'help close the gap' on smartphones

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