Nokia posts first quarterly loss this decade

October 16, 2009 05:08:07 PM

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The world's biggest mobile phone maker Nokia reported Thursday its first loss in a decade amid rising competition in the smartphone market and problems with its Nokia Siemens Networks joint venture.

The Finnish company posted a third quarter net loss of 559 million euros (834 million dollars), attributed to falling sales and an unexpectedly large impairment cost for its networks business.

The shock loss drove Nokia shares down sharply, by 10.87 percent to 9.18 euros on the Helsinki stock exchange, which was down 1.11 percent overall shortly before closing.

"At first the results looked pretty good but a close look revealed that some important things are in bad shape," FIM Bank analyst Michael Schroeder said.

He explained that the fall in profitability in the mobile phone division and the decrease in the smartphone market share were worse than expected.

Nokia estimated its market share of the global smartphone segment fell to 35 percent from 41 percent in the second quarter.

The company's results were mainly weighed down by a 908-million-euro impairment charge for goodwill in telecom equipment maker Nokia Siemens Networks, a joint venture with Germany's Siemens.

The company reported a third quarter operating loss of 426 million euros, compared to a profit of 1.5 billion euros in the same period in 2008.

Sales in the July-September period fell nearly 20 percent to 9.8 billion euros, while the average selling price of a Nokia device remained at 62 euros.

"Our volumes and net sales were, however, somewhat constrained by component shortages we encountered across the portfolio," chief executive Olli-Pekka Kallasvuo said in a statement.

For the past year, the world's biggest mobile device maker has been suffering from the global financial turmoil that has made many consumers trade down to cheaper phones.

At the same time, competition in smartphones has become tougher as many consumers opt for Apple's iPhone or RIM's Blackberry over a Nokia device.

Nokia's "challenges remain especially in the high-end of the market. We have not seen big improvements actually," Gartner analyst Carolina Milanesi noted.

But Kallasvuo remained upbeat about demand, which started to pick up in the third quarter.

"I expect the fourth quarter to be the best quarter of the year in terms of net sales, volumes and margins," he told journalists and investors.

"We continue to strive for cost-efficiency and product based differentiation of devices and relevant services," he added.

Nokia said it aimed to improve the profitability of its mobile phone unit in the fourth quarter.

It hiked its forecast for global mobile phone sales, saying these would fall approximately seven percent in 2009 from 2008, compared to its previous prediction for a 10 percent fall.

Analyst Jari Honko of eQ Bank said it was good sign that "the global mobile device volume forecast was clarified," adding that Nokia's view was more positive than current market expectations.