HELSINKI (AP) — The world’s largest handset maker, Nokia, is expected to report its worst quarterly result in many years on Thursday as the global economic crisis continues to hit the mobile phone industry.
OVERVIEW: Nokia has fared better than many rivals during the credit crunch but it also has been hit by falling demand and low handset prices after a major setback in the last quarter of 2008.
In January, Nokia warned of cost cuts after reporting that fourth-quarter net profit crashed 70 percent to €576 million ($744 million) and that it lost market share – to 37 percent from 38 percent in the previous quarter and 40 percent in the fourth quarter of 2007.
Last month, Nokia announced 1,700 layoffs worldwide. It also plans to increase short-term unpaid leaves and sabbaticals and has appealed to employees to accept holiday time as payment, instead of cash, for overtime work in 2009. Nokia employs 128,400 people.
BY THE NUMBERS: Thirty-five analysts surveyed by Thomson Reuters said the global mobile phone industry is expected to report an 18 percent drop in sales from January to March, to 241.7 million units. The survey said Nokia was expected to report its worst quarterly result since 2001 and that it would further lose market share to 37.4 percent in the quarter, from 39.2 percent a year earlier.
WHAT’S AHEAD: Last year, Nokia held onto its position as the No.1 mobile phone maker, selling 468 million handsets, up 7 percent on 2007, and more than its three main rivals combined.
“A market leader like Nokia has a better opportunity to face the challenging conditions than weaker competitors,” Chief Executive Olli-Pekka Kallasvuo said in January.
Observers will be looking at how the industry bellwether has fared in the crisis, with particular attention on Nokia’s traditional strong market areas like the Pacific and China, where it reported its greatest drop in fourth-quarter 2008 sales – a 36 percent decline from 2007.
The Finnish company has given a bleak outlook for the industry, saying it expects global mobile device volumes to drop 10 percent in 2009 compared to last year, but has not said how much it expects to suffer.
Kallasvuo blamed “weaker consumer confidence, unprecedented currency volatility and credit tightness” for the downturn, but maintains the Espoo-based company is not in crisis. “We are now in the toughest environment ever,” Kallasvuo said in an interview in February. “Nokia is no way in a crisis, but the challenges are huge.”
ANALYST TAKE: Nordea Bank analyst Martti Larjo expects Nokia’s profits to fall in the first quarter. “I don’t think there will be any great surprises. We expect a poor result, but we think Nokia will still make a profit,” Larjo said. “I believe Nokia will retain its position and will lose only a little market share, if any at all.”
STOCK PERFORMANCE: In January, Nokia’s share price plunged 10 percent to under €9 when it reported its fourth-quarter result, but the company is used to market fluctuations even when profits have been good. In early March, Nokia stock dipped to €6.90 – a longtime low – in line with a general plunge in share prices amid the economic downturn. This week Nokia has been trading on the Helsinki Stock Exchange at between €10.00 and €10.50. On Wednesday, Nokia stock was down some 2 percent at €10.29 ($13.66) in early afternoon trading.