Multimedia drives Nokia sales and profit in Q2

Nokia reported increased sales and profit for the second quarter, lifted by strong performance in multimedia products. Mobile phone sales contributed to the sales gain, but falling margins in that division meant a slight decline in operating profit there.

The company reported net sales of Euro 8.06 billion (AUD$12.82 billion as of June 30, the last day of the period reported), up 25 percent from a comparable figure of Euro 6.46 billion a year earlier. Nokia made net profit of Euro 799 million, up 15 percent from Euro 695 million a year earlier. That translates to earnings per share (EPS) of Euro 0.18, up from Euro 0.15 a year earlier.

For the third quarter, Nokia expects sales of between Euro 7.9 billion and Euro 8.2 billion, and EPS of between Euro 0.14 and Euro 0.17. In the third quarter of 2004, it had sales of Euro 7.1 billion and EPS of Euro 0.15.

Nokia estimates the industry will sell 760 million mobile phones worldwide this year, an increase on its previous estimate of 740 million. In 2004, it estimates that 643 million phones were sold.

Nokia's mobile phone sales for the quarter rose 20 percent, to Euro 4.86 billion, but a decline in operating margin from 19.8 percent to 16.2 percent meant operating profit for the division dropped to Euro 789 million, from Euro 802 million a year earlier.

Sales of multimedia products, a category in which Nokia includes games consoles and 3G (third generation) mobile phones, rose 89 percent, to Euro 1.38 billion, and the division moved to an operating profit of Euro 126 million, from an operating loss of Euro 64 million a year earlier.

The hottest-selling item in this sector was the 6680 smart phone, but other models running Nokia's Series 60 user interface software, such as the 7610, also sold well, it said. Marketing costs increased, as it spent heavily on promoting its Nseries sub-brand for gaming and music-playing phones.

Nokia sold 60.8 million phones or multimedia devices in the second quarter, 34 percent more than in the same period a year earlier. The increase in volume came predominantly in emerging markets where low-end products are the most popular. This, and competition in more mature markets, forced average selling prices down to Euro 105, compared to Euro 108 a year earlier. That decline will continue through the end of the year, the company said.

The company shipped 27.8 million phones in Europe, the Middle East and Africa during the quarter, up 56 percent from a year earlier. In China it shipped 7.4 million, up 76 percent, and 10.5 million in the rest of the Asia-Pacific region, up 28 percent. Shipments declined 22 percent in North America, to 6 million but rose 21 percent in Latin America, to 9.1 million.

The company restated year-earlier figures to make them comparable under new International Financial Reporting Standards (IFRS) introduced on Jan. 1.

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