Nokia's sales, profit and market share drop

Sales for the last three months of 2008 totalled US$17.9 billion.

Nokia reported fourth-quarter sales down about 19 percent year on year. The company sold fewer phones than a year earlier, and its market share also dropped, it said Thursday.

Sales for the last three months of 2008 totalled EUR12.7 billion (US$17.9 billion as of Dec. 31, the last day of the period reported), lower than analysts had expected.

The economy has continued to worsen, and that has affected the mobile industry, according to Nokia.

Nokia is still making money, but a lot less than it did a year ago. The company reported a net profit at EUR576 million, compared to EUR1.8 billion a year earlier.

Just like other vendors in the sector, Nokia aims to lower costs by more than EUR700 million by 2010. The plan will include staff cuts, but Nokia isn't ready to announce any details, Nokia Chief Financial Officer Rick Simonson said during a conference call.

The company sold 113.1 million phones during the fourth quarter, 15 percent fewer than it sold a year earlier, and also lower than the 117.8 million it sold during the third quarter.

Those figures disappointed analysts.

"Volumes were a little bit lower than we expected. We predicted their sales to be flat quarter on quarter rather than down," said Carolina Milanesi, research director at Gartner, via e-mail.

The drop in volume reflects not only the current economic climate but also Nokia's relative weakness in high-end phones for markets such as Western Europe, according to Milanesi.

Nokia now estimates its market share at 37 percent, down from 38 percent in the third quarter and 40 percent in the fourth quarter of 2007.

In 2009 Nokia hopes to turn this around and increase its market share, Nokia CEO Olli-Pekka Kallasvuo said during a conference call.

The company had been expecting a less-than-rosy fourth quarter. It lowered sales expectations twice during the last months of 2008.

On Nov. 14 Nokia said it expected 330 million phones to be sold worldwide during the fourth quarter, and 1.24 billion for the whole of 2008. It had previously expected 1.26 billion devices to be sold. Then on Dec. 4 Nokia had some more bad news: the mobile phone market had continued to deteriorate and sales would be even lower than the November estimate.

In the end, Nokia estimates that 305 million phones where sold during the fourth quarter, a 9 percent drop compared to 2007. The company's estimates of overall sales are significant because it has such a huge share of the market.

To set itself apart from the competition, Nokia must now improve the usability of its phones so buyers can take advantage of the growing set of services it provides through its Ovi portal, Milanesi said.

To improve its high-end portfolio, Nokia needs to refresh the Nseries of smartphones, according to Geoff Blaber, analyst at CCS Insight. Sales of its smartphones where down in the fourth quarter, according to Nokia.

The mobile phone market is becoming increasingly polarized around cheap entry-level phones and high-end smartphones. So Nokia needs to maintain its market leading position in the first space, and at the same time improve high-end portfolio, Blaber said.

Nokia has seen the traction that the smartphone sector has experienced, and the company will now increase its investment in the sector, according to Kallasvuo.

The company aims to expand the definition of a smartphone, officials said during the conference call. Nokia aims to combine hardware and service offerings to come out with smartphones for sectors that are not covered, and announce products at different price points. Product details were not provided.

Nokia expects mobile phone sales to continue to decline in the first quarter of 2009.

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Mikael Ricknäs

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