Nokia Corp., the world's biggest mobile phone maker, is expected on Thursday to report a drop in profits and sales as it tallies up the last quarter of 2009 — a difficult year in the cellular industry.
OVERVIEW: Falling sales combined with lower handset prices helped push Nokia into the red for the first time in a decade in the third quarter. The company, based in Espoo, Finland, posted a loss of €559 million ($832 million) as sales fell 20 percent to under €10 billion.
The mobile phone industry has been hit hard by the financial crisis, and Nokia last year slashed more than 3,000 jobs globally and temporarily laid off thousands in Finland. Its joint network equipment venture with Germany's Siemens AG — Nokia Siemens Networks — announced some 5,700 job cuts. Nokia has warned of more cost cuts and plans to increase short-term unpaid leaves and sabbaticals. It employs 123,350 worldwide.
BY THE NUMBERS: FIM Bank expects Nokia's operating profit in the quarter to plunge more than 20 percent to €972 million from the same period in 2008 and net sales to fall by 12 percent to €11.1 billion. But the Helsinki-based analysts predict Nokia will sell 121 million handsets in the quarter, up 6 percent. London-based market Strategy Analytics expects Nokia to show only 4 percent growth in volume sales of handsets, to 118 million units, compared to an overall market growth of 5 percent.
Nokia is due to report its fourth-quarter and full-year 2009 earnings on Jan. 28.
WHAT'S AHEAD: In 2008, Nokia held onto its position as the No. 1 mobile phone maker, selling 468 million handsets — up 7 percent on 2007 and more than its three main rivals combined. It has predicted that the industry's global handset sales in 2009 would show a drop of 7 percent over 2008. Nokia said its market share in the fourth quarter would remain unchanged from the previous quarter, when it was 38 percent.
Chief Executive Olli-Pekka Kallasvuo described 2009 as "the toughest environment ever" in the sector, but the company has suggested that better times are ahead. Last month, it predicted that global mobile phone sales will grow by 10 percent this year on 2009 levels, revising previous estimates and suggesting the mobile sector is recovering from a global recession.
As handset markets have become saturated Nokia has increasingly expanded into providing online services, such as downloads of music, games, maps and the fast transfer of photos and video in a global online market it estimates will reach €100 billion by the end of the year. By the end of 2011 it expects to have 300 million active users of its services.
Last week, Nokia began providing free navigation services for users of its smart phones, in a drive to counter a similar move by Google Inc. Through its new downloads, Nokia hopes to double the number of GPS navigation users to 50 million worldwide.
ANALYST TAKE: Neil Mawston of Strategy Analytics says Nokia continues to search for ways to improve its performance, which has fallen behind its rivals'. "Nokia is still chasing some of its major competitors who will continue to outperform the market with good portfolios of devices, including touch phones and smart phones. Nokia just needs to fill the gaps in its portfolio because it has a strong distribution network and power pricing."
STOCK PERFORMANCE: Nokia's share price plummeted 12 percent in October after the third-quarter report. It dropped even further — to a low of €8.45 in early December — but has been on a seesaw since to reach this year's high of €9.36 on Jan. 8. On Tuesday afternoon, Nokia was trading at €8.97 ($12.69), almost unchanged from Monday's closing price.
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