Nokia downbeat on handset sales

Nokia downbeat on handset sales

By Andrew Ward in Stockholm

Published: July 16 2009 12:14 | Last updated: July 16 2009 15:43

Shares in Nokia slid more than 14 per cent on Thursday after the world’s largest mobile phone maker cut its outlook for margins and market share amid continued decline in global handset sales.

Olli-Pekka Kallasvuo, chief executive of the Finnish group, said there were signs that the overall market was bottoming and hailed the group’s “solid performance” as it announced second-quarter earnings that narrowly beat analysts’ expectations.

But investors chose to focus on downgrades in the group’s guidance for margins and market share in the remainder of the year, as Mr Kallasvuo acknowledged that competition remained “intense” in a declining market.

Nokia said it expected its market share to remain flat in 2009, compared with 2008, having previously predicted an increase.

It also conceded that operating margins in its main devices and services division were likely to miss an earlier target to be in the teens in the second half of the year.

In afternoon trading in Helsinki shares in Nokia were €1.56 cent lower at €9.54.

The downbeat assessment of the global handset market followed results from rival Sony Ericsson, which reported a €213m loss compared with a previous year profit and recorded a sharp fall in sales for the three months to the end of June.

Analysts were encouraged, however, by the robust second-quarter results, with sales and profits up from the previous quarter as the rate of decline in the market slowed.

Operating profits were down more than 70 per cent at €427m, or €0.10 per share, compared with last year, but this was better than the 72 per cent decline forecast by analysts and the 90 per cent drop suffered in the first quarter.

Sales were down by nearly a quarter at €13.2bn against the same period a year ago but this was up 7 per cent from the prior quarter.

“As a result of strong operational execution, underlying operating margins improved sequentially in all segments. Competition remains intense, but demand in the overall mobile device market appears to be bottoming out,” said Mr Kallasvuo.

He highlighted a slight increase in overall market share during the quarter to 38 per cent, while the group’s share of the fast-growing smartphone market rose to 41 per cent.