Published January 13, 2015
Nokia (NOK), the world's largest cell phone maker, reported a sharp drop in first-quarter net profit and sales on Thursday and slashed its sales forecasts for the rest of the year, causing its share price to plummet by nearly 10 percent.
The group's net sales fell 12 percent to 7 billion euros (dlrs 6.2 billion) in January through March, from 8 billion euros in the same period last year, Nokia said. Net profit was 915 million euros (dlrs 805 million), compared with 1 billion euros a year earlier.
Chief Executive Jorma Ollila said Nokia retained a 37 percent market share of global mobile phone sales and reiterated its 40 percent target. He said the company performed better than expected during the first quarter, when "it saw a bottom in the industry."
"The following three quarters will be better from our point of view, ... but the recovery will be slower than what we foresaw," Ollila said.
However, Nokia said it now expects its sales to increase 4 percent to 9 percent this year, rather than 15 percent. It also lowered its estimate for total global handset sales in 2002 to between 400 million and 420 million units, from an earlier forecast of more than 420 million.
Nokia's share price fell by 9.7 percent to 21.16 euros (dlrs 18.62) on the Helsinki Stock Exchange in mid-afternoon trading as investors were disappointed by the warning of lower sales.
"Turnover is an uncompromising measure of performance," said Jussi Hyoty, chief analyst at FIM Securities. "One wonders about Nokia's competitiveness; it's not going so well for this company now."
Hyoty said Nokia was unlikely to achieve its goal of capturing 40 percent of the global handset market with its current performance.
Earnings per share were 0.19 euros (16 cents), down from 0.22 euros a year earlier, the company said. It predicted that earnings per share in the second quarter would be between 0.18 euros to 0.20 euros (16 cents to 17.5 cents).
Nokia's first-quarter network sales fell by 29 percent to 1.4 billion euros (dlrs 1.2 billion) and handset sales fell 7 percent to 5.4 billion euros (dlrs 4.7 billion).
During the past year, telecommunications equipment manufacturers have been hit hard as debt-burdened operators have cut spending due to disappointing results from new technology.
Nokia also announced it will lay off more than 600 people at its plant near Dallas, Texas.
Ollila said that Nokia will introduce its first third-generation, or 3G, mobile phones in September as planned.
Networks using 3G technology, also known as the Universal Mobile Telephone System, offer transmission speeds nearly 40 times greater than existing standards and provide access to Internet services, video and e-mail.
Last year, Nokia group's net profit was 2.2 billion euros (dlrs 1.9 billion), down 44 percent from 3.9 billion euros in 2000, on net sales of 31.1 billion euros (dlrs 27.6 billion).
Nokia is based in Espoo just outside Helsinki. It has operations in 130 countries with more than 50,000 employees.