Nokia struggles in Smart Phone Market

July 22, 2010


, HELSINKI, July 22 – The world\’s top mobile phone maker Nokia reported a 40-percent quarterly net profit plunge on Thursday to 227 million euros but held its earnings forecast for its key devices and services unit.

The Finnish company had slashed its second-quarter and full-year forecasts for its key devices and services unit last month, citing fierce competition as it faces mounting pressure from Apple and Research in Motion (RIM) in the market for multifunction telephones.

From April to June, Nokia posted a net profit of 227 million euros (290 million dollars) in the second quarter, down 40 percent from 380 million euros for the same quarter last year.

Analyst expected a profit drop of 30 percent, according to estimates published in the Finnish press.

Nokia said its net sales were up 1.0 percent on a year-to-year basis to 10.0 billion euros, and that the sales in its devices and services unit were up 3.0 percent on a year-to-year basis to 6.8 billion, but down 2.0 year-to-year in constant currency.

CEO Olli-Pekka Kallasvuo, who according to the Wall Street Journal could soon lose his job because of his inability to hike Nokia\’s performance in the competitive smartphone market, said the second quarter earnings gave reasons to be optimistic.

"Despite facing continuing competitive challenges, we ended the second quarter with several reasons to be optimistic about our future. For one, the global handset market has continued to grow at a healthy pace, led by some of the less mature markets where Nokia is strong," he said.

Nokia continues to lead the cellphone market, but is under pressure from the likes of Apple\’s iPhone and RIM\’s BlackBerry in the high-end segment, with competitor\’s phones seen as faster and easier to use then Nokia\’s, which are based on outdated Symbian technology.

Kallasvuo said the company would continue to renew its portfolio in smartphones.

"We believe that the Nokia N8, the first of our Symbian 3 devices, will have a user experience superior to that of any smartphone Nokia has created," he said, adding the new model would "kick-start Nokia’s fightback at the higher end of the market."

Nokia said it had sold 111.1 million devices in the second quarter, up 8.0 percent on a year-to-year basis.

But its market share stood at 33 percent, down 35 percent from last year and equal to the first quarter, while the average selling price of its devices was down to 61 euros from 64 euros a year earlier, a drop attributed to a higher proportion of lower-priced phones sold and price pressure on certain smartphones.

The company forecast that its devices and services sales for the next quarter would total 6.7 billion-7.2 billion euros.

Shares in company, which had recently plunged to their lowest level in 12 years, were up 4.22 percent to 7.28 euros on a Helsinki Stock Exchange up 1.45 percent at around 1200 GMT.

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