Nokia continues to struggle in Q2

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Nokia faced another difficult quarter for its devices and services division, as the financials struggled in the competitive smartphone market

Nokia has reported difficult results for the second quarter as it continues to feel the squeeze from Apple and others in the smartphone market.

Nokia had already downgraded its outlook for the second quarter for devices and services, and said net sales would be at the lower end of, or slightly below, the previously expected range of €6.7 billion to €7.2 billion. This was primarily due to lower than previously expected average selling prices and mobile device volumes.

Reported net sales in the devices and services segment came in at €6.8 billion, up three per cent from the second quarter of 2009 and two per cent from the first quarter of 2010.

However, Nokia said net sales for devices and services would have declined two per cent had the results been reported at a constant currency rate.

Operating profit in the division fell 16 per cent to €643 million and the operating margin shrank from 11.6 per cent to 9.5 per cent over the year.

Latin America was a particularly key market for Nokia, with the value of sales up 31 per cent year-on-year and 28 per cent quarter-on-quarter. Sales in Greater China were also up 21 per cent year-on-year, although down 6 per cent quarter-on-quarter, while in Asia-Pacific sales were down year-on-year but up 13 per cent since the first quarter.

Net sales in Nokia’s biggest market Europe remained fairly stable, while North America recorded a 16 per cent decline year-on-year. The Middle East and Africa saw a 10 per cent fall in net sales year-on-year and a seven per cent negative swing quarter-on-quarter.

Sales of feature phones were down four per cent year-on-year to €3.4 billion, although business in what Nokia reports as ‘converged mobile phones’, including smartphones and mobile computers, added 12 per cent to net sales year-on-year to take it to €3.4 billion.

Nokia said the total volume of mobile devices it sold during the quarter was 111.1 million, an eight per cent growth year-on-year. It estimates 338 million units were shipped by the industry as a whole during the second quarter, up 14 per cent over 2009, giving it a 33 per cent market share.

Nokia added that the industry as a whole shipped 59 million smartphones and mobile computers during the quarter, while it moved 24 million units over the same period. This was up 42 per cent from a year ago and gives Nokia a 41 per cent market share, according to its own estimates.

In terms of volume, North America was the only market to see a year-on-year fall, down 19 per cent, with Latin America accounting for 11.2 million of the 111.1 million units shipped, a 26 per cent increase.

Price pressures and higher sales of lower priced smartphones led Nokia’s average selling price (ASP) to decline from €64 in the second quarter of 2009 to €61 in the second quarter of 2010.

The ASP decline was more marked for smartphones than feature phones, and fell from €181 in 2009 to €143 this year. Quarter-on-quarter, there was a €12 decrease in the smartphone ASP, which was cited as result of “price pressure in certain high-end smartphones”, namely the iPhone 4, and a strategy to sell devices at a lower price point to reach a wider group of consumers.

Nokia chief executive Olli-Pekka Kallasvuo said: “Despite facing continuing competitive challenges, we ended the second quarter with several reasons to be optimistic about our future.

“For one, the global handset market has continued to grow at a healthy pace, led by some of the less mature markets where Nokia is strong. We are also encouraged by the solid second quarter performance of our mobile phones business, helped by an improving line-up of affordable models.”

Nokia said it is working on a family of phones built on the Symbian^3 platform that will give it broader reach and appeal.

Kallasvuo said: “In smartphones, we continue to renew our portfolio. We believe that the Nokia N8, the first of our Symbian^3 devices, will have a user experience superior to that of any smartphone Nokia has created.

“The Nokia N8 will be followed soon thereafter by further Symbian^3 smartphones that we are confident will give the platform broader appeal and reach, and kick-start Nokia’s fightback at the higher end of the market.”

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