NOKIA HAS said it expected its struggling mobile phone business to remain profitable in the third quarter, bringing some relief to investors after it lost its lead in the smartphone market to rival Apple.
Nokia, the world’s largest phone maker by volume, has failed to come up with an attractive smartphone offering to compete with Apple’s iPhone and a wide array of smartphones using Google’s Android software.
Nokia reported a second-quarter underlying operating profit of €391 million, above all analysts’ forecasts, which ranged from a loss of €35 million to profit of €285 million in a Reuters poll, boosted by royalty revenues of €430 million in the quarter.
Nokia had forecast a €150 million royalty boost in April, and analysts said most of the remaining €280 million likely came from settling a legal dispute with Apple.
The report was a rare spot of good news for Nokia, pushing its shares up 2.9 per cent to €4.20 at lunchtime yesterday.
The share price had halved since February when it unveiled a shift to Microsoft software, as investors worried that the company would lose so much market share before the new phones come out that it might never make up lost ground.
Nokia’s quarterly phone sales volume dropped 20 per cent from a year ago, missing analysts’ forecasts, and losing market share at a time when the overall market grew around 10 per cent.
However, analysts said they had expected worse. Many said the company’s outlook for its phone business to be “slightly above break-even” in the current quarter was comforting. “It is a glimmer of hope in an overall very gloomy picture,” said Angus Campbell, head of sales at Capital Spreads.
“The guidance for the third quarter was a relief. It seems it will not be as bad as was feared,” said Hannu Rauhala, analyst at Pohjola Bank.
Nokia said it sold 16.7 million smartphones in the quarter, falling behind Apple’s sales of 20.3 million iPhones.
The Finnish company created the smartphone market in 1996 with its first Communicator model, but has failed in recent years to find an answer to the success of the iPhone and Research In Motion’s BlackBerry.
Nokia chief executive Stephen Elop has been pinning turnaround hopes on new smartphones using Microsoft software, but these will only come to market later this year.
“The path to recovery for Nokia is going to be a long one. Deterioration in Nokia’s smartphone performance shows that time is of the essence in rebuilding a coherent portfolio of Windows Phone 7 products in 2012,” said CCS analyst Geoff Blaber.
On a conference call with analysts and press Mr Elop said he had “increased confidence” that Nokia would ship its first Windows Phone 7 device this year.
He said the adoption of Microsoft’s operating system would create new opportunities. Nokia will also be able to exploit technologies it hasn’t accessed in the past, such as CDMA and TD-CDMA technology, and tap new markets geographically. – (Reuters)
