Nokia reports profit, sales up in third quarter

Nokia, the world's largest mobile phone maker, said Thursday it had increased its share of the world's handset market as it reported slightly increased sales for the third quarter, its first sales growth since last year's second quarter.

The Espoo, Finland, company posted a net profit of €610 million (US$598 million as of Sept. 30, the last day of the period being reported), up 228 percent from €186 million in the year-ago period. Excluding goodwill amortization and nonrecurring items, net profit rose a more moderate 16 percent to €881 million from €760 million, Nokia said in a statement.

This year's results include a one-time charge of €306 million related to outstanding long-term financing to German mobile operator MobilCom AG and €54 million in goodwill amortization. Last year's results included €787 million in charges related to operator loans and goodwill amortization.

Sales for the quarter were up 2 percent to €7.22 billion from €7.05 billion a year ago, meeting Nokia's forecast. Although Nokia lowered its sales forecast last month, the figure falls in the range it originally gave on July 18 when it announced its second quarter results.

Pro forma earnings per share in the third quarter was €0.18, ahead of Nokia's guidance of between €0.15 and €0.17. The pro forma operating margin at Nokia Mobile Phones increased from 19 percent to 22 percent, but dropped from 9.3 percent to 5.2 percent at Nokia Networks, in line with Nokia's September forecast.

Nokia said it increased its share of the worldwide handset market from last year, with phone sales up 17 percent in the third quarter to 37 million units. Motorola Inc., the world's second largest handset maker, said on Wednesday it shipped 17 million units in the third quarter, up 7.6 percent from 15.8 million a year ago.

Nokia estimates the worldwide handset market grew 13 percent to 103 million units in the third quarter. The Finnish company reiterated its forecast that 400 million handsets will be sold worldwide this year. Motorola trimmed its market size forecast on Wednesday, from 400 million units to 390 million because of lower demand.

Year-on-year market growth for Nokia was strongest in Europe and Africa where it saw "a robust growth" after a number of "lackluster quarters," said Jorma Ollila, chairman and chief executive officer of Nokia on a conference call. "We saw a weakening of the market in the Americas, Latin America in particular."

In contrast, Motorola of Schaumburg, Illinois, on Wednesday said it is doing well in its home market, but believes it lost between a half and one percentage point market share in Europe in the third quarter.

Comparing the second with the third quarter, the decline in the Americas actually slightly pushed Nokia's share of the handset market down, Nokia said, without providing further numbers.

Although Nokia had good news about its mobile handset business, its infrastructure side continues to suffer from low demand from operators. Nokia Mobile Phones sales for the quarter were up 7 percent year-on-year at €5.63 billion, while sales at Nokia Networks dropped 7 percent to €1.55 billion, Nokia said.

"The current environment highlights the fact that we have two distinctive businesses today," said Ollila, adding that the company's competitive position in the handset business is "better than ever," but that it does not see a recovery for its networks business anytime soon.

Looking ahead, Nokia expects fourth quarter sales to be between €8.9 billion and €9.2 billion, up between 2 percent and 5 percent compared with last year. Driving the growth will be mobile phone sales, Nokia said.

Pro forma earnings per share for the fourth quarter are expected to be in the range of €0.23 to €0.25 with pro forma operating margins for Nokia Mobile Phones and Nokia Networks to stay at third quarter levels, Nokia said.

Shares in Nokia (NOK1V) were up 10.19 percent at €16.54 in late afternoon trading at the Helsinki stock exchange.

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