Nokia Claims 40 Percent of Phone Market
Nokia reported a 44 percent rise in net profit for the fourth quarter, on sales that increased 34 percent. The company estimates 1.14 billion phones were sold in 2007, 40 percent of them bearing the Nokia brand.
The company made net profit for the quarter of €1.84 billion (US$2.7 billion as of Dec. 31, last day of the period reported), up from €1.27 billion a year earlier.
Sales for the quarter rose to €15.7 billion from €11.7 billion a year earlier. Growth was dampened by the weakening dollar: at constant currency rates, sales would have grown by 40 percent, the company said.
Nokia is counting on its acquisition of digital mapping data provider Navteq, and its move into the Internet services business, to drive future growth, Chief Financial Officer Rick Simonson said in a conference call with analysts.
Basic mobile phones sales now account for less than half the group's revenue, down from 60 percent a year earlier. Although sales volumes increased, the average selling price of such phones dipped from €89 to €83.
Around the world, shipments in the quarter increased 26.5 percent, with growth topping 40 percent in Asia. Growth could have been faster were it not for shortages of certain components, Nokia said. Sales fell in North America, Nokia's smallest geographic market, where shipments dropped 13.6 percent to 5.1 million phones. Nokia blamed the drop on its progressive withdrawal from the market for phones based on CDMA technology, used mainly in North America, to focus on the GSM technology used worldwide.
Nokia's multimedia division saw a 42 percent increase in sales, to €3.03 billion, and a doubling of operating profit, driven by the success of consumer smartphones such as the N73 and N95, which the company describes as "multimedia computers." It shipped over 11 million Nseries devices and over 2 million of its Eseries enterprise devices during the quarter.
New phones and multimedia devices that began shipping in volume during the quarter accounted for about 30 percent of profits and revenue, said CEO Olli-Pekka Kallasvuo.
Looking ahead, the company expects mobile phone sales to dip slightly in the first quarter, picking up to grow 10 percent for the full year. It also expects its share of that market to grow, although average selling prices will likely continue to decline, it said.
"Much work remains in order to realize our ambitions," Kallasvuo said. "We will not underestimate the competition."
Nokia will have to address its problems in North America if it wants to increase its share of the mobile phone market further, said Gartner research vice president Carolina Milanesi.
The company is working with U.S. operator Sprint Nextel to build a nationwide WiMax network, but Milanesi does not expect sales of WiMax devices to compensate for the company's falling CDMA market share during 2008.
"It's not going to happen overnight," Milanesi said.
Simonson found a silver lining to the cloud over Nokia's performance in North America: with such a small share of the U.S. market, the company has little exposure to the country's economic troubles.