Nokia's strong Q1 performance

Martin Garner/Ovum
18 Apr 2008

Nokia posted very strong results for Q1 2008 on April 17 and said it is targeting share gains in a market that it believes will soften in the US and Europe.

Revenues for the group were €12.66 billion, up 28% over the year from €9.86 billion. Operating profit rose by 20% from €1.27 billion to €1m53 billion. This is a decline in operating margin from 12.9% to 12.1%, which is due to exceptional items, without which operating margin would have risen to 14.7%

Nokia shipped 115.5 million phones, which is slightly above the normal seasonality and trend figure, giving growth of 27% over the year. The average selling price (ASP) declined from €83 in Q407 to €79, so revenues grew a more modest 13% to €9.23 billion. However, operating profit in the devices and services business rose 50% over the year from €1.25 billion to €1.88 billion, giving an operating margin of 20.3%, up from 15.3%.

CEO Olli Pekka Kallasvuo described the results as strong and said Nokia is targeting market share gains in the second quarter.

Nokia continues to forecast volume growth in the market of 10% for 2008, but said that it now expects the handset market value to decline over the year because of the weaker US dollar and weakening economic conditions in the US and - possibly - Europe.

This is the first set of results reported by Nokia under its new reporting structure, so it is not simple to do a direct comparison on all aspects. It is a very healthy set of results, underlining the strength of Nokia's phone portfolio and its market position in most areas.

The devices and services business performance shows that the market is not yet being affected by economic conditions to any material degree. It showed impressive double-digit growth in all regions except the US and western Europe.

In the US Nokia's volumes fell both year on year and sequentially - this has been a thorn in its side for over a year now and it is running a big internal project to improve the position during 2008. There have not been many devices launched purely for the US market yet, but we expect to see more in the coming months.

In western Europe Nokia grew volumes by 7.5% over the year. The best growth overall was in Latin America (63% y-o-y) and the best pick-up in this quarter's results was in China, where Nokia had slipped slightly - it saw 4% sequential and 33% year on year growth.

The fall in average sale price is due to a shift in the mix, with fewer high-end models selling after the Christmas season and a greater weight of emerging markets in the overall picture.

At the high end, where Nokia has previously enjoyed a roughly 50% market share, we saw slower growth. Volumes were up 24% to 14.6 million, compared to market growth of 42%.

This has become a very busy area of the market with a number of strong offerings from each of the other major players. Nokia is still in a strong position in this segment, but we should expect to see gradual erosion of its share over the coming year as the 3G iPhone comes to market and the list of other competing offerings grows.

Related content

No Comments Yet! Be the first to share what you think!