A nostalgic but bullish Jorma Ollila on Thursday unveiled his last full-year results as Nokia’s chief executive, saying the global mobile phones market would grow by more than 10 per cent this year from an estimated 795m devices shipped in 2005.
Mr Ollila reiterated the Finnish company’s ambitious target of conquering 40 per cent of the market even as the average selling price of its mobiles fell further.
“It’s a very good, reachable target and a very good energiser for the organisation,” Mr Ollila said ahead of his departure as chief executive this June when Olli-Pekka Kallasvuo, chief operating officer, takes over.
But shares in Nokia lost 2.8 per cent at €14.69 as the company admitted that handset margins in a business driven increasingly by emerging markets had fallen below €100. in spite of record shipments of 84m mobiles in the fourth quarter of last year. Operating margins fell to 13.2 per cent from 15.3 per cent in the fourth quarter of 2004 as the average price of a handset dropped to €99 from €111 in the fourth quarter of 2004.
Mr Ollila defended Nokia’s increasing reliance on emerging markets, where consumers spend less per handset, noting that China was easily the company’s biggest market, with India, Russia and Saudi Arabia also in the top 10.
Richard Simonson, chief financial officer, said: “If we wanted to manage up the ASP [average selling price], that would be tantamount to shrinking the market. I’d rather use the opportunity to grow the market.”
Nokia expects the global number of mobile subscribers to breach 3bn by the end of 2008 after hitting 2bn last year. Net sales came to €10.3bn in the fourth quarter, exceeding €10bn for the first time. However, pre-tax profits fell by 7 per cent to €1.453bn ($1.77bn) as losses at the Enterprise Solutions unit soared and profitability at Mobile Phones declined.
But soaring sales at Multimedia, the unit responsible for high-end handsets, offered hopes that Nokia’s new music and camera phones were helping to restore a reputation for innovation after missing the clamshell trend. Sales at the unit grew 63 per cent last year.
Mr Ollila said 2005, his last full year, had witnessed Nokia’s return to growth.
In an emotive attempt to draw a line under a revelation this week that Mr Kallasvuo had committed a minor tax fraud before his appointment to succeed the Nokia leader, Mr Ollila condemned the offence.
But he said Mr Kallasvuo had been forgiven and retained the company’s confidence. “We are all human and make errors…,” Mr Ollila said.
“But we also have a right to forgiveness.”