Nokia Q4 profits fall on cut mobile phone prices

Nokia reported a 13 percent decline in net profit for the fourth quarter as revenue from its mobile phone division continued to decline. The Finnish handset manufacturer did post a modest gain in total sales but expects tough market conditions to continue throughout 2005, slowing overall growth, it said Thursday.

Nokia, the world's largest handset maker, reported fourth-quarter net sales of Euro 9.06 billion (US$12.36 billion as of Dec. 31, 2004, the last day of the period being reported), up 3 percent from Euro 8.79 billion in the year-ago period, it said in a statement.

But sales in its ailing mobile phone division were down by 6 percent year-over-year, to Euro 5.66 billion. As in past quarters, Nokia pointed to price pressure brought on by increased competition and the further weakening of the U.S. dollar. On a positive note, the mobile division shipped a higher number of units. Sales volumes for handsets and other mobile devices rose 19 percent to 66.1 million units, to give Nokia a market share of 34 percent for the quarter and 32 percent for the full year, Nokia said.

"Device volumes also reached new highs for the fourth quarter and full year largely backed by the ongoing boom in growth markets such as Latin America, Russia, India and China and brisk sales of color screen and camera phones," Chief Executive Officer Jorma Ollila said in a conference call on the results Thursday. "Our North American phone volumes were, however, disappointing."

Nokia's handset channel inventories were at normal levels by the end of 2004, Ollila said.

Net profit fell to Euro 1.02 billion, or Euro 0.23 a share, from Euro 1.17 billion, or Euro 0.25 a share, in the fourth quarter of 2003, the Espoo, Finland, company said.

Nokia beat expectations of Euro 0.19 per share on revenue estimates of between Euro 8.4 billion to Euro 8.5 billion, according to Thomson First Call. In October, Nokia had forecast profit of Euro 0.16 to Euro 0.18 a share and sales of Euro 8.4 billion to Euro 8.6 billion.

Ollila credited record volume handset sales, a stabilization in average selling prices and a better-than-expected performance by its networks infrastructure business, for Nokia's ability to beat expectations for the quarter. Sales in its networks infrastructure business were Euro 1.91 billion, up 12 percent year-on-year.

"The past year was demanding for Nokia," Ollila said, but added that he believes the company is now better positioned for 2005 due in large part to restructuring efforts. Ollila reiterated Nokia's five top priorities in 2005 are in the areas of customer relations, product offering, research and development efficiency, demand-supply management and the ability to offer end-to-end solutions.

Separately on Thursday, Nokia announced it will lay off about 350 employees by April at its production facility in Fort Worth, Texas, which the company plans to turn into a customization and logistics center.

The company forecast net sales for the first quarter of between Euro 7 billion and Euro 7.3 billion, or Euro 0.12 to Euro 0.15 per share, compared with Euro 6.6 billion, or Euro 0.17 per share, in the first quarter of 2004.

Nokia said it continues to expect the mobile device market as a whole to grow by about 10 percent in volume from an estimated 643 million units in 2004 "and to grow slightly less in value terms," Ollila said.

In the first quarter of this year, Nokia expects over 160 million phones will be sold, Ollila said.

By the end of 2005, Ollila said he fully expected Nokia to have achieved a well-balanced handset portfolio. "When we are sitting here 12 months from today, I think that the fourth quarter portfolio would be something I could say ... is very balanced," he said.

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Laura Rohde

IDG News Service
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