HELSINKI (AP) —Nokia is expected to report a further drop in quarterly profits and sales on Thursday as the global economic crisis continues to hurt demand in the mobile phone industry.
OVERVIEW: Nokia has fared better than many rivals during the credit crunch but it also has been hit by falling sales and low handset prices after a major setback in the last quarter of 2008. This year, Nokia has announced more than 2,600 global job cuts and temporary layoffs of 2,500 workers in Finland. Its second-quarter profits plunged 30 percent to €1.1 billion and sales fell 5 percent.
The Finnish company has warned of more cost cuts and 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. Nokia employs 124,000 worldwide.
BY THE NUMBERS: Thirty-seven analysts surveyed by Thomson Reuters predict that Nokia will report a 69 drop in pretax profit in the third quarter to €435 million, from €1.4 billion a year earlier. But, the survey said the downward trend in the average price of Nokia handsets has halted and will be unchanged from the second quarter, when it fell to €62 — from €72 in 2008 and €82 in the same period in 2007.
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. In July, it revised a target to gain market share in 2009, saying it expects no change from last year. In the second quarter, its share was 38 percent — unchanged from 2008, but up from 37 percent in the first quarter of this year.
Markets will be looking for signs from the industry bellwether of a bottoming out in the fall in demand in the mobile sector, as Chief Executive Olli-Pekka Kallasvuo forecast when announcing the second-quarter report in July. Earlier this year, he described the current crisis as “the toughest environment ever.”
The Espoo-based 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.
Nokia has been the top handset maker since 1998 and has gradually expanded to include online services, such as downloads of music, games, maps and the fast transfer of photos and video in a global online market it estimates will reach €100 billion by 2010.
ANALYST TAKE: Strategy Analytics analyst Neil Mawston expects Nokia’s sales in the quarter to have fallen faster than the market average. “They are still on the downward path and the handset ASP (average selling price) is also down a bit,” Mawston said. He estimates that some 290 million handsets were sold worldwide in the third quarter — down 5 percent from a year earlier — and that Nokia’s sales fell 7 percent to some 110 million units in the period.
STOCK PERFORMANCE: Nokia’s share price plummeted 15 percent to €9.47 in July after the second-quarter release but it has steadily gained ground, climbing over the €10 mark to close up more than 2 percent at €10.15 on Monday. In afternoon trading on Tuesday, Nokia was almost unchanged at €10.12 ($14.94) on the Helsinki Stock Exchange.