labels: Telecom
Nokia posts 69 per cent profit drop in fourth quarter, loses market share to rivals news
22 January 2009

Nokia Oyj, the world's largest mobile-phone maker, reported a bigger-than-estimated drop in profit, reduced its dividend for the first time in seven years and forecast a 10 per cent slide in industry sales.

Net profit was 576 million ($743.62 million), down from 1.84 billion in the same period in 2007. Sales fell 19.5 per cent to 12.7 billion, from 15.8 billion. The results came in below expectations, sending Nokia shares down more than 5 per cent in Helsinki to 9.66 ($12.47). The stock lost 58 per cent in 2008, its worst annual decline since at least 1992.

Nokia sold 15 per cent fewer phones in the quarter than a year earlier and cut its industry sales forecast for a third time since November. The global economic crisis has hurt consumer demand, leading competitors Motorola Inc. and Sony Ericsson Mobile Communications Ltd. to post losses. Espoo, Finland-based Nokia plans to preserve cash by cutting costs and its dividend.

Nokia proposed cutting its 2008 dividend to 40 cents from 53 cents the previous year, the first cut since the payout for 2001. Nokia said profitability at its main devices and services unit would be lower in the first half. It forecast an operating margin of more than 10 per cent in the first half and between 13 per cent and 19 per cent in the second half. It had previously predicted the margin would be in the teens for the entire year.

''In recent weeks, the macroeconomic environment has deteriorated rapidly, with even weaker consumer confidence, unprecedented currency volatility and credit tightness continuing to impact the mobile communications industry,'' CEO Olli-Pekka Kallasvuo said in the statement. ''We are taking action to reduce overall costs and to preserve our strong capital structure.''

The company aims to cut annual costs at the devices and services unit by more than 700 million euros by the end of 2010. The fourth-quarter operating margin excluding one-time items was 12.1 per cent, down from 22.8 per cent a year earlier. Earnings per share excluding one-time items and issues related to purchase-price accounting fell to 26 cents from 48 cents a year earlier. Analysts had predicted earnings of 30 cents on that basis. Nokia booked 747 million of charges, mainly for goodwill amortization and restructuring measures.

Nokia said its share of the handset market fell to 37 per cent, down from 38 per cent in the previous quarter and 40 per cent in the fourth quarter of 2007. The company said it expects to maintain its market share at the same level in the first three months of 2009, and maintains its target of increasing market share in the full year.

In advanced models, Nokia has lost ground to Apple Inc.'s iPhone and Research In Motion Ltd.'s BlackBerry models. The Finnish company started selling its first touch-screen device in the fourth quarter, more than a year after the first iPhone went on sale, and has vowed to regain market share in smartphones, which can access the Internet.

Motorola, the market leader until a decade ago, announced last week it would cut a further 4,000 jobs as demand languishes under the strain of the recession. The company shipped half as many phones in the fourth quarter as a year earlier, and reported a loss as revenue fell as much as 27 per cent. (See: Motorola to slash 4,000 jobs, equivalent to 6 per cent of workforce)

Sony Ericsson, the mobile-phone venture between Ericsson AB and Sony Corp., said last week it aims to return to profit in the second half of this year after posting two consecutive quarterly losses. (See: Ericsson beats market blues, will still lay off 5,000 bracing for 2009)

Earlier Thursday, South Korea's LG Electronics Inc. said its mobile phone shipments grew 8 per cent in the fourth quarter, though the company swung to a net loss because of other units.

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Nokia posts 69 per cent profit drop in fourth quarter, loses market share to rivals