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Nokia: Profit And Market Share Down; CEO: ‘Significant Challenges’ Ahead

Nokia’s Q4 and full-year earnings report is coming in just now, and it spells out in numbers some of the issues facing the world’s biggest handset maker today.

Stephen Elop, Nokia’s new CEO, summed up the results and the challenges ahead in the company’s earnings statement (PDF):

“In Q4 we delivered solid performance across all three of our businesses, and generated outstanding cash flow. Additionally, growth trends in the mobile devices market continue to be encouraging. Yet, Nokia (NYSE: NOK) faces some significant challenges in our competitiveness and our execution. In short, the industry changed, and now it’s time for Nokia to change faster.”

Net profit for the quarter was down to €743 million ($1 billion) compared to €882 million ($1.2 billion) for the same quarter a year earlier, a drop of nearly 16 percent. And Nokia is losing market share: while Q4 overall industry mobile device volumes were up 12 percent to 402 million units year-on-year, Nokia estimates its own device market share went down 4 percent to 31 percent.

On a more positive note, Nokia’s net sales were up six percent to €12.7 billion ($17.4 billion). Nokia attributed this to an increase of the average sales price (ASP) of devices to €69 ($94), compared to €64 a year before. Overall, net sales in Nokia’s devices and services division were €8.5 billion ($11.6 billion), a rise of four percent year-on-year. That actually compares favorably with Apple’s iPhone revenues of $10.5 billion.

Actual handset volumes were down for the period in almost all regions. The biggest slide in device volumes was, predictably, in North America. These were down by 32 percent to a mere 2.6 million units, compared to 3.8 million the year before. To be fair, North America is by far Nokia’s smallest market — although a big one to be losing in so badly. What’s more significant for Nokia is that volumes were down in almost every other market, too.

Taking Nokia’s three biggest markets for handsets, in Europe, Nokia sold 33.5 million units compared to 34.3 the year before, a decline of two percent. Asia Pacific (excluding Greater China) was down by nine percent, to 31.3 million from 34.5 million. And Middle East and Africa was also down by nine percent, to 22.2 million compared to 24.3 million year on year.

The one standout increase was in Greater China, which increased by 24 percent to 21.9 million units from 17.6 million the year before. (Nokia’s success in China was also highlighted last week in some research that showed how its Ovi store was the dominant app portal in the country.)

China was also Nokia’s biggest market in terms of device sales: it rose by 35 percent to €1.7 billion ($2.3 billion) compared to €1.2 billion ($1.6 billion) the year before. Significantly, in Europe — which is Nokia’s biggest market by far — sales were down by two percent to €3 billion ($4.1 billion) from €3.2 billion ($4.4 billion) the year before.

Smartphones: Nokia’s smartphone division, despite all the competitive knocks it seems to be getting, particularly from Apple (NSDQ: AAPL) and the many device makers churning out Android devices, still grew by quite a bit in the quarter. “Converged mobile devices” sales were up to €4.4 billion ($6 billion), a rise of 13 percent on the year-ago €3.9 billion ($5.3 billion). And volumes were up, too: 28.3 million units, a rise of 36 percent year-on-year.

Navteq is still a relatively small part of Nokia’s overall business in terms of actual revenues, but the mapping division saw some of the biggest gains in terms of its growth. It reported sales of €309 million ($423 million) for the quarter, a rise of 37 percent year-on-year.

2 Responses to “Nokia: Profit And Market Share Down; CEO: ‘Significant Challenges’ Ahead”

  1. Why is it 2011 and the main platform Nokia is still using is Series 60? This platform goes back years before todays fast growing platforms (i.e. iOS and Android) and is so dated it is a joke.

    I just don’t get what they have been doing up there in Finland all these years.