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Nokia earnings up, but shares fall

Nokia Corp., the world’s leading cell-phone maker, on Thursday posted 43 percent growth in second-quarter earnings.
/ Source: The Associated Press

Nokia Corp., the world’s leading cell-phone maker, on Thursday posted 43 percent growth in second-quarter earnings, boosted by rising sales of high-end phones and a settlement related to the sale of a Turkish operator.

The results were largely in line with expectations, but Nokia shares fell 2.9 percent to 15.09 euros ($18.84) on the Helsinki exchange as investors worried about declining profit margins as Nokia’s market growth has stalled.

Net profit for the April-June period was 1.14 billion euros ($1.42 billion), up from 799 million euros in the second quarter last year. Earnings were driven by continued strong sales of high-end mobile phones with cameras, music players and Internet access.

Sales rose 22 percent to 9.81 billion euros ($12.24 billion), from 8.06 billion euros in the year-ago period.

Nokia said its second-quarter operating profit included an exceptional gain of 276 million euros ($345 million) from the recovery of a claim against Turkish telecom operator Telsim.

The Finnish company maintained its forecast that the global handset market would grow 15 percent from an estimated 795 million units sold in 2005.

“The markets for both mobile devices and mobile infrastructure continued to show healthy growth,” said Nokia Chief Executive Olli-Pekka Kallasvuo.

Nokia said its market share was 34 percent, down 1 percent from the first quarter but up from 33 percent in the second quarter of 2005.

Gains in Europe and Asia were offset by a loss of market share in North America, South America, the Middle East and Africa, Nokia said. North American sales volumes fell 13 percent to 5.2 million phones.

The report came a day after closest rival Motorola Inc. reported a 48 percent jump in second-quarter profits on record handset sales.

The U.S. mobile phone maker said heavy demand for its trendy Razr line of phones helped lift its global market share to 22 percent, the highest since the 1990s.
The top two mobile phone makers’ market share estimates matched those released by market research firm Strategy Analytics on Thursday.

“If these two vendors’ growth rates were to continue at their present pace, Motorola could potentially overtake Nokia during 2007,” the research firm said in a statement. Samsung ranked third with 11 percent of the market ahead of Sony Ericsson and LG Electronics Inc.

“The market is growing faster than expected and Motorola is the key beneficiary of that,” said telecom analyst Erik Suchsdorff of FIM Securities.

However, he said Motorola would need to come up with new popular models to keep its momentum: “Eventually their Razr models will run out of steam.”

Analysts polled by SME Direkt had expected Nokia to post a net profit of 1.21 billion euros ($1.51 billion) and sales of 9.74 billion euros ($12.16 billion).

Nokia said it shipped 78.4 million phones in the quarter compared with 60.8 million units a year ago. But the closely watched average selling price declined to 102 euros ($127) from 105 euros, pulled down by large volumes of low-priced phones sold in emerging markets.

Nokia’s Multimedia unit, which sells advanced high-end phones such as the popular N-80 and N-91, saw revenues rise 37 percent to 1.89 billion euros ($2.36 billion). Multimedia sales more than doubled in China and Asia-Pacific from a year ago.