Declining Phone Sales Drive Down Nokia Net Income in Q2

Nokia reported second-quarter sales 25 percent lower than a year earlier, and net income down 66 percent. While it predicts that sales will stop dropping in the third quarter, it now expects to see no increase in its market share this year.

Second-quarter sales totalled €9.91 billion (US$13.9 billion as of June 30, the last day of the period reported), down from €13.15 billion a year earlier. Net income came in at €380 million, down from €1.1 billion, Nokia said Thursday.

Sales of mobile phones, which accounted for €6.59 billion of Nokia's revenue, declined 27.5 percent, slightly faster than sales of network infrastructure, which fell 21.3 percent to €3.2 billion.

Nokia's phone revenues are declining faster than shipments as the average selling price falls -- and this despite a move towards higher-end models.

Phone shipments for the quarter fell 15.4 percent year-on-year to 103.2 million units. Smartphone shipments increased 10.5 percent, to 41 million units.

Compared to last quarter, Nokia said, its share of the mobile phone market increased slightly, to 41 percent in the smartphone segment and 38 percent overall. In the first quarter it estimated its shares at 39 percent and 37 percent, respectively. But those shares are still the same or lower than a year earlier, when the company estimated its share of the smartphone segment at 41 percent and the overall phone market at 40 percent.

For the full year, it expects its market share to remain the same as in 2008: it had previously forecast an increase in market share.

The company's shipments were hardest hit in Latin America (down 41.8 percent) and North America (down 28.9 percent), while sales picked up 5.7 percent in Greater China, where the company sold 18.6 million phones.

Nokia predicted that global mobile phone shipments will remain stable or increase slightly in the third quarter, although it doesn't expect its share of the market to change. It expects shipments for 2009 to be around 10 percent lower than in 2008.

Navteq, the digital mapping provider that Nokia acquired last July, had an operating loss of €100 million on revenue of €147 million for the second quarter, a slight improvement on its performance in the first quarter. Because Nokia bought the company during the year, it did not provide a year-on-year comparison -- and made no projections for how the business will evolve in future.

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