Nokia 2Q results good, but still under pressure

Nokia has announced its second quarter results. The manufacturer made net sales of Euro 9.9 billion, down 25% year on year and up 7% sequentially (down 24% and up 7% at constant currency).

Devices and Services net sales were Euro 6.6 billion, down 28% year on year and up 7% sequentially (down 28% and up 7% at constant currency). Devices and Services made a gross margin of 34%, up from 33.8% in Q1 2009.

Nokia estimated industry mobile device volumes of 268 million units, down 12% year on year and up 5% sequentially. Nokia mobile device volumes hit 103.2 million units, down 15% year on year and up 11% sequentially.

Nokia estimated mobile device market share of 38% in Q2 2009, down from 40% in Q2 2008 and up from 37% in Q1 2009.

Gartner research director Carolina Milanesi said of Nokia’s results: “Good set of results for Nokia devices this morning. Volume sales was slightly higher than expected with ASP that held up sequentially and a bigger smartphone mix. This is certainly encouraging for a vendor that is under a lot of pressure at the moment to deliver more compelling products in the high end.”

Services net sales were Euro 140 million (billings of Euro 207 million). Due to the divestment of the security appliance business in April 2009, services net sales are not directly comparable to prior periods.

Olli Pekka Kallasvua, CEO at Nokia, stated: “Nokia put in a solid performance in what was another tough quarter. We increased our share of the global mobile device market sequentially to an estimated 38% and grew our smartphone market share to an estimated 41%. As a result of strong operational execution, underlying operating margins improved sequentially in all segments. Competition remains intense, but demand in the overall mobile device market appears to be bottoming out. As before, we are continuing to tightly manage our operating expenses.

“We are balancing short-term priorities with our longer term growth ambitions as elements of the mobile handset, PC, internet and media industries converge to form a new industry. Consumers will increasingly expect devices and services designed as integrated solutions. To capture this opportunity we are accelerating our strategic transformation into a solutions company.”

Nokia Siemens Networks net sales were low, at Euro 3.2 billion, down 21% year on year and up 7% sequentially (down 20% and up 8% at constant currency).

The business reported operating cash flow of Euro 716 million. Total cash and other liquid assets at Nokia were valued at Euro 7 billion at the end of Q2 2009.

Nokia expects industry mobile device volumes in the third quarter 2009 to be at approximately the same level or up slightly sequentially. It said it expects its mobile device market share in the third quarter 2009 to be approximately at the same level sequentially. The manufacturer continues to expect 2009 industry mobile device volumes to decline approximately 10% from 2008 levels, in line with Sony Ericsson’s claims earlier today.

Nokia now expects its market share in mobile devices to be approximately flat in 2009, compared with 2008. This is an update to Nokia’s earlier target to increase its market share in mobile devices in 2009.

Milanesi added: While most players are suffering from the shift towards lower priced devices that the economy is forcing consumer to make, Nokia is benefiting from this from a sales perspective. The tricky part of course is to maintain margins and hold ASP which Nokia seem to have managed to do this quarter. For the remaining of the year Nokia will continue to be under pressure to deliver more compelling high end devices as well as more touch-screen devices all with a better user interface.”

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