Nokia suffers from a 69 percent drop in profit; aims at introducing more ‘iconic’ smartphone models

Saturday, January 24, 2009, 6:52
Cell Phones
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Last week, Nokia, the Finnish communications company released the financial results for the fourth quarter of 2008. The results showed a net profit of €576m (£543m). The profits were down from €1.84bn as compared to the same quarter of 2007. Nokia’s operating profits were down 80 percent, and net sales fell by almost 20 percent in all its function areas that include businesses like the Devices and Services, Navteq and Nokia Siemens Networks divisions. The biggest blow was witnessed by the Devices and Services business whose net sales fell by almost 27 percent. The drop in operating profits was just over 61 percent.

Nokia’s chief executive, Olli-Pekka Kallasvuo, blamed the condition of the economy for the lower profits, but re-assured that Nokia had a great window of opportunity in the web-services business. Nokia has suffered sales losses of 39 percent in the Greater China region. The losses are about 23 percent in the regions like Middle East and Africa. The management of the company believes that the reasons for this decline in profits are weaker consumer confidence, unprecedented currency volatility and credit tightness. Nokia aims at investments at a proper pace despite these losses. It is particularly eying the newly evolving internet-services market.

The high costs of Nokia handsets, as compared to other handsets, are also identified as one of the main reasons for the decline in profits. The biggest shock to Nokia has come in the form of a sharp dip in its Smartphone sales. The sales of high-end, consumer-oriented N-series Nokia devices have suffered more badly than the business-oriented E-series Nokia devices. Due to these factors, Nokia has called for introduction of more “iconic” smartphone models that will be high-end in terms of performance, but low-end in terms of price. But these hiccups in the profits do not seem to take away the global market share of Nokia, which has stayed at its previous 37 percent. Nokia expects this share to remain more or less static in the first quarter of 2009 but is skeptical of the same for the entire year. And if this was not enough, the share prices of Nokia shares have also dipped by a noticeable amount.