Nokia Profit and Sales Grow, but Q1 Still Disappoints

Nokia reported improved profits and revenue for the first quarter, but both numbers were below analysts' expectations. The company also lowered its operating margin outlook for 2010.

Nokia's first-quarter profit came in at €349 million (US$465 million), up from €122 million a year ago, helped by cost cuts and increased smartphone sales. Revenue grew by 3 percent and totaled €9.5 billion.

The company continues to face tough competition in the high-end sector of the mobile phone arena and challenging market conditions on the infrastructure side of the business, where it is represented by Nokia Siemens Networks, according to a statement.

Much has been made of Nokia's deficiencies in the smartphone segment. The company sold 21.5 million smartphones in the first quarter 2010, an increase of 57 percent compared the same period in 2009 and 3 percent more than in the fourth quarter of 2009. That means Nokia's market share now stands at 41 percent, a one point gain over the last quarter of 2009.

The growth mainly comes from lower priced smartphones. However, Nokia still doesn't have a high-end smartphone that can compete with the likes of the iPhone and the Google Nexus One and its sibling, the HTC Desire.

That has an effect on Nokia's average sales price per phone, which was down to €62 from €66 a year ago. The average sales price of its smartphones dropped from €190 to €155.

The company is planning a family of smartphones based on the Symbian 3 operating system, which will offer the improved user experience Nokia's CEO Olli-Pekka Kallasvuo has been promising. The first device will be launched during the second quarter and shipped in the third quarter, according to Nokia. That's later than originally planned, but the company is putting quality first, Kallasvuo said during a conference call.

In total, Nokia sold 107.8 million phones during the first quarter, which was up 16 percent year-on-year.

The Finnish phone manufacturer also commented on the repercussions of the ash cloud from the Icelandic volcano Eyjafjallajökull. Nokia said it has adjusted its logistics operation to help ensure the availability of products and components. However, it is too soon to gauge the overall impact of the eruption that disrupted air travel throughout Europe in recent days, according to Nokia. It may have an adverse impact on sales, but that depends on how long the alternative measures have to be in place, Nokia said.

Nokia expects sales of mobile devices will increase by 10 percent in 2010.