Nokia sales plunge but outlook maintained

Nokia struck a note of cautious optimism on Thursday about the state of the battered mobile phone market, saying it was no longer in freefall.

The world’s largest handset maker reported a 90 per cent fall in net profit for the first quarter of 2009, as consumers in developed and developing countries bought fewer mobiles because of the global recession.

Olli-Pekka Kallasvuo, chief executive, said it was too early to say if consumer demand had reached its lowest point. However, he added: “Although the trajectory of end-user demand remains unclear, we believe the market is no longer falling in an uncontrolled manner.”

Nokia’s shares closed up more than 9 per cent at €11.08.

The Finnish company pleased investors by sticking to its previous guidance that mobile unit sales by all handset-makers would decline by 10 per cent in 2009 compared with last year. Some analysts estimate unit sales will fall by 15 per cent.

Handset-makers have enjoyed 15 years of hyper-growth.

Nokia said a glut of unsold mobiles held by retailers had helped depress its sales in the first quarter, but said the problem was easing.

Mr Kallasvuo insisted Nokia was better placed than some smaller rivals to meet consumer demand for cheap mobiles in the downturn, partly because of its superior economies of scale.

Motorola and Sony Ericsson, which are reporting losses, are focusing on selling mid- to high-priced mobiles. Samsung and LG are engaging in fierce competition with Nokia in emerging markets, particularly in Asia, and the average selling price of the Finnish company’s mobiles is falling sharply.

Nokia sold 93.2m handsets in the quarter to March 31, down 19 per cent compared with last year. The company reported revenue of €9.3bn ($12.3bn), down 27 per cent. Net profit fell 90 per cent to €122m, and earnings per share were €0.03.

Analysts said the one large blemish in Nokia’s results was a poor performance by its division that makes fixed line and mobile network equipment.

Nokia cut its guidance for the infrastructure market, saying it expects revenue generated by all makers of network equipment to fall by 10 per cent in 2009 compared with last year. Its previous guidance was for a decline of more than 5 per cent.