Nokia feels the pinch from emerging markets

Finnish vendor Nokia has seen profits for the first quarter slide downwards by 7 per cent year on year to Eur979m, which the company attributes largely to the gradual shift of its business into emerging markets.

Device shipments were up 21.4 per cent on the first quarter of 2006, to 91.1 million units, leading Nokia to calculate its handset market share as 36 per cent.

Nokia’s traditionally weak position in the US market got even weaker, as the vendor’s unit shipments for the first quarter fell by 42.5 per cent year on year to 4.8m.

Despite an increase in handset unit shipments, revenues fell five per cent year on year to Eur5.6bn and net sales were down in all regions.

The firm’s average selling price (ASP) for the quarter fell to Eur89, from Eur103 in the previous year, a decline that Nokia attributed to “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”.

Operating profit for the terminals unit in the first quarter was down 14 per cent to Eur936m, with a margin of 16.8 per cent. Sales in the high end were down, the company said, although it shifted some 8 million N-Series and 1 million E-series devices in the quarter.

In the networks division, operating profit for the quarter fell significantly – by 48 per cent to Eur78m – despite the fact that sales figures were all but identical year on year.

Parallel to the handset division, there was a marked slump in US sales, and to a lesser extent a decline in Latin America.

There was, however, a notable increase in sales in the Middle East and Africa, and to a lesser extent in China, Asia Pacific and Europe.

Going forward, Nokia expects second quarter device volumes to increase slightly, while market share should remain stable.

Overall, the firm is predicting a 10 per cent increase in industry device sales from its 978 million unit estimate for 2006. The firm warned, however, that ASPs would continue to be hit by reliance on emerging markets and by general competitive factors.