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Nokia's quarterly profit slumps 66 percent

3 min

Finland's giant Nokia announced its profit was down 66 percent compared to 2008, with a quarterly profit of 380 million euros. The good news for Nokia is that its Q2 profit is far better than the 122 million euro it made in the first quarter.


AFP - Finnish telecoms giant Nokia reported a 66.0-percent collapse in quarterly net profit to 380 million euros (535 million dollars) on Thursday because of a drop in handset sales and weak prices.

The company's share of the worldwide handset market fell to 38 percent, down from 40 percent 12 months earlier, the company said.

Nokia said the worsening global economic conditions were the key driver behind the drop in profits, citing "weaker consumer and corporate spending, constrained credit availability and currency market volatility."

"People are trading down to a certain extent," buying cheaper phones, said Nokia's chief financial officer Rick Simonson in a conference call.

"Competition remains intense," chief executive Olli-Pekka Kallasvuo said in a statement. "But demand in the overall mobile device market appears to be bottoming out."

The company also said that global mobile phone volumes would fall by about 10 percent in 2009 from the level in 2008, and that growth for rest of this year would be flat.

Shares in Nokia were down 13.9 percent on the news to 9.55 euros on the Helsinki stock exchange at 1435 GMT in an overall market down 1.96 percent.

Analysts said the shares were falling because Nokia cut back its profit target for its devices and services unit, indicating it faces tough price competition from other mobile manufacturers.

It lowered its profitability target for its devices and service unit, its biggest division responsible for handset manufacturing.

Industry watchers said that although the results were "well in line with market expectations" they were disappointed that Nokia had lowered its profitability target.

"A lower margin target in (handset) devices for the second half indicates that there is a price competition ongoing" between mobile phone makers, FIM Bank analyst Michael Schroeder told AFP.

Markets were also disappointed "that the average selling price fell sharper than expected," Pohjola Bank analyst Hannu Rauhala noted.

For the period April 1 - June 30, the average price for a Nokia handset was 62 euros, down from 65 euros in the first quarter.

The Finnish company sold around 103 million handsets worldwide in the second quarter.

Its revenues amounted to 9.9 billion euros, down by nearly 25 percent from 13.2 billion euros during the same period in 2008. Operating profit fell by 71 percent from a year ago to 427 million euros.

Nokia launched a restructuring programme in January aiming for 700 million euros in savings over the next two years. So far this year, it has announced about 4,000 job cuts, including 1,300 voluntary departure packages.

Simonson told journalists and investors: "We will continue to assess our cost structure and take action to strike the right balance between near-term cost controls and investing for future growth and profitability."

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