Smart phones boost Nokia as 4th quarter profits grow 65 percent despite slump in sales

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Smart phones boost Nokia as profits grow 65 pct

HELSINKI — The world’s biggest mobile phone maker, Nokia Corp., on Thursday said strong sales of smart phones and lower costs helped profits rise 65 percent in the fourth quarter despite a drop in total revenue.

The better-than-expected report sent Nokia shares surging and suggested that the cell phone industry is recovering from the impact of the global financial crisis.

Nokia’s net profit was euro948 million ($1.3 billion) in the last three months of 2009, up from euro576 million in the last quarter of 2008 although sales fell 5.3 percent to euro12 billion from euro12.7 billion.

CEO Olli-Pekka Kallasvuo predicted that total global mobile phone sales would grow 10 percent in 2010, and that Nokia would retain its market share. Four of 10 cell phones sold worldwide are Nokia products.

“This quarterly result shows that there is a quite a lot of momentum in the mobile phone market at the moment, and that was also apparent in Nokia’s result,” Kallasvuo said.

Nokia shares closed up some 10 percent at euro9.91 ($13.87) on the Helsinki Stock Exchange.

The Finland-based company said its share of the global handset market grew to 39 percent in the fourth quarter, from 38 percent in the previous quarter and 37 percent in the fourth quarter of 2008.

In smart phones, where competitors include Research in Motion Ltd.’s BlackBerry and Apple’s Inc.’s iPhone, Nokia said its market share rose from 35 percent to 40 percent.

“This was the surprise. Many had expected Nokia’s share of smart phones to fall even lower from earlier figures but in fact it was up,” said Michael Schroeder from FIM Bank. “And across the board Nokia did pretty well.”

The company’s results were also boosted by the fact that special items, one-time costs which include restructuring charges, were significantly lower than in the comparable quarter in 2008.

The mobile phone industry was hit hard by the financial crisis, and Nokia last year slashed more than 3,000 jobs globally and temporarily laid off thousands in Finland. Its joint network equipment venture with Germany’s Siemens AG — Nokia Siemens Networks — announced some 5,700 job cuts.

As the market leader, Nokia has been better prepared to weather the crisis, but in the third quarter it posted its first quarterly net loss in a decade amid falling sales, lower handset prices and a one-time charge for the fallen value of its network equipment unit.

Sagging sales of network equipment continued in the fourth quarter and were only partly offset by a rise in sales for mobile devices. Nokia sold 127 million handsets, up 12 percent on the same period in 2008 and 17 percent more than in the third quarter of 2009.

Meanwhile, the average selling price of Nokia handsets, which had been on a downward curve, saw its first quarterly increase since 2004 — to euro63 from euro62 in the previous period. In the last quarter of 2008, the average price was euro71.

As handset markets have become saturated Nokia has increasingly expanded into providing online services, such as downloads of music, games, maps and the fast transfer of photos and video in a global online market it estimates will reach euro100 billion by the end of the year. By the end of 2011 it expects have 300 million active users of its services.

Kallasvuo highlighted the company’s announcement last week to provide free navigation services for users of its smart phones, in a drive to counter a similar move by Google Inc. Through its new downloads, Nokia hopes to double the number of GPS navigation users to 50 million worldwide.

Kallasvuo said it was “a good example of how we are leveraging our assets to bring real benefits to consumers.”

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Ritter reported from Stockholm.

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On the Net:

Nokia: www.nokia.com.