Nokia's operating profit down 7 % in Q1

MUMBAI: Mobile handset major Nokia has announced that its operating profit for the first quarter ending 31 March 2007 was down by seven per cent.

Its net profit came down to $1.3 billion from $1.4 billion in the first three months of 2006.


It incurred restructuring charges of 32 million euros. Its device market share was 36 per cent at the same level as the previous quarter and marginaly up from 35 per cent in the first quarter of last year. Nokia‘s average selling price (Asp) in the first quarter 2007 was 89 euros down from 103 euros in the first quarter 2006 and at the same level as in the fourth quarter 2006.

The lower year on year ASP in the first quarter 2007 was primarily the result of a significantly higher proportion of entry-level device sales, where the industry growth especially in the emerging markets has been strong and where Nokia‘s share has been growing.

In addition, certain ageing higher end products in its portfolio were viewed as less competitive in various markets. Sequentially, first quarter 2007 ASPs were impacted by a higher percentage of entry-level device sales. That sequential development was offset by strong sales of its higher ASP devices, particularly from the multimedia business group.

First quarter net sales decreased five per cent to 5.6 billion euros compared with 5.9 billion euros in the first quarter 2006. Strong overall volume growth was not enough to offset a significant ASP decline year on year, driven primarily by a higher proportion of entry-level sales. Net sales decreased in all regions except the Asia-Pacific. Net sales were down
significantly in the US and to a lesser degree in Latin America, Middle East and Africa, Europe and China.

Nokia CEO Olli-Pekka Kallasvuo says, "I am encouraged by Nokia‘s first quarter 2007 performance. Our profitability was strong, with both gross and operating margins up sequentially, excluding special items. We also saw good year on year device volume growth that led to an increase in our market share, further solidifying our number one position in the industry.

"Our multimedia business group achieved record net sales and operating margin in a seasonally challenging environment. Multimedia continues to lead in the convergence space, with close to eight million Nokia Nseries devices shipped during the quarter, including the ground-breaking Nokia N95 multimedia computer.

"Our Enterprise Solutions business group showed improved results, bolstered by sales of the new Nokia E65, and we are targeting break even for Enterprise Solutions in the second quarter 2007. Mobile Phones mid-range portfolio was strengthened by the Nokia 6300, which began initial shipments in the first quarter.

"We are excited that Nokia Siemens Networks started operations on 1 April, 2007. We believe that this new company will have the scale, portfolio and innovation to assume a leading position in the communications infrastructure market."


Converged device industry volumes increased to an estimated 23.5 million units, compared with an estimated 17 million units in the first quarter 2006. Nokia‘s own converged device volumes rose to 11.8 million units, compared with 8.5 million units in the first quarter 2006. Nokia shipped close to eight million Nokia Nseries and more than one million Nokia Eseries devices during the first quarter 2007.

First quarter 2007 net sales of multimedia handsets increased by 28 per cent to 2.3 billion euros compared with 1.8 billion euros in the first quarter of last year. Net sales increased year on year in all regions except the US where net sales continued at a low level. Multimedia net sales year on year growth was
fastest in Latin America and China. Net sales growth was driven by high volumes of Nokia Nseries multimedia computers, especially the Nokia N73 and Nokia N70, combined with a stable ASP year on year.

Multimedia reported operating profit in the first quarter 2007 grew 31 per cent to 424 million euros, compared with 323 million euros in the first quarter of last year, with an operating margin of 18.8 per cent. Operating profit growth in the first quarter 2007 was driven by strong net sales growth and effective operating cost control, compared to the first quarter 2006.


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