Nokia Q3 Earnings Drop - InformationWeek

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Nokia Q3 Earnings Drop

It held its global lead in the handset market, but problems in the Nokia Siemens Networks unit hurt the company's latest earnings report.

Nokia reported a surprise third quarter loss of $836 million Thursday, traced primarily to a big write-off in its Nokia Siemens Networks unit. In addition Nokia reported declining sales of its mobile phones.

The surprise size of the loss sent Nokia's shares tumbling 10% in early stock market trading. There was some faint good news, however, as Nokia said it maintained its handset market share lead with 38% share of the global market.

Nokia reported revenues of $14.7 billion, a drop from the $18.2 billion reported in the previous quarter. The Nokia Siemens Networks unit recorded a $1.36 billion loss in the recent quarter.

The unit recently tested Long-Term Evolution voice calling and announced it is expanding its U.S. LTE efforts.

"The demand for mobile devices improved in many markets during Q3," Nokia CEO Olli-Pekka Kallavuo said in a statement. "With the average selling price of our devices holding quarter-on-quarter, our higher device volumes translated into increased net sales in our Devices & Services business. Our volumes and net sales were, however, somewhat constrained by component shortages."

While Nokia maintained its global market share, it began experiencing pressure in the smartphone category where its market share dropped to 35% from 41% in the second quarter.

In one encouraging note in the report, Nokia said it no longer expects a 10% drop in industry revenue, substituting that number with a somewhat mitigating 5% predicted drop. In addition to the negative impact of the worldwide economic recession, Nokia is facing increased competition in its smartphone category, chiefly from Apple's iPhone.

The company said it shipped 4.5 million Nokia Nseries and 4.4 million Nokia Eseries devices during the third quarter -- down slightly from the combined 9.3 million devices that were shipped in the second quarter.

The problems in the Nokia Siemens Networks unit weren't entirely unexpected, because in recent weeks, executives at co-owner Siemens had discussed the possibility of writing down its investment in the joint networking operation. The unit was created in the spring of 2007 after Siemens' networking operation suffered a series of debilitating corruption scandals and Nokia took over the leadership of the combined operation.

On Thursday, Nokia said it now expects the market share of Nokia Siemens Networks to decline in 2009.Nokia said Simon Beresford-Wylie has stepped down as chief executive officer of Nokia Siemens Networks and was replaced in the position by Rajeev Suri on Oct. 1.


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