Nokia, the world's leading handset maker, reported a 90-percent drop in its first-quarter net profit on Thursday but its shares shot higher as investors seized on signs of improving market conditions. The Finnish firm's net profit in January-March plunged to 122 million euros (160 million dollars), the weakest net profit this decade as the company saw its sales dive amid the global financial crisis.
Nokia has announced more than 3,000 job cuts since January as part of a vast cost-cutting package, including 1,000 voluntary departure packages. Chief executive Olli-Pekka Kallasvuo said sales from January to March were hit as retailers held back on ordering new handsets, but a possible pick-up was seen in the next quarter. Nokia's market share of 37 percent was down from 39 percent in the same quarter a year ago amid stiffer competition from "smartphone" makers Blackberry and Apple, but was stable from the fourth quarter.
The company said however it saw a light at the end of the tunnel and expected its market share to rise in the second quarter. "There are some nascent signs of relative stability, and I emphasise relative, in the market," Nokia's financial director Rick Simonson told Bloomberg television.
Kallasvuo was cautious however, saying "it is too early to say that end-consumer demand has hit the bottom." Shares in Nokia surged after the results were released and were up 12.83 percent to 11.43 euros at 1230 GMT on the Helsinki stock exchange, which was 5.0 percent higher.
One unnamed trader quoted by Dow Jones Newswire said the figures in the earning report were lower than expected "but the outlook is quite reassuring." Kallasvuo noted that it was getting easier to predict demand and said "the demand picture (is) becoming more predictable as we enter the second quarter."
"Retailers' inventories are lower now, which means that devices delivered to the retail channel will reach consumers fairly quickly," explained Michael Schroeder, an analyst at FIM Bank in Helsinki. The company's operating profit dropped by 74.1 percent to 514 million euros, from 1.98 billion euros for the first quarter of 2008.
Sales amounted to 9.28 billion euros, down by 26.7 percent from 12.66 billion euros during the same period in 2008. Nokia said it sold 93.2 million phones in the first quarter, a drop of 19 percent from the same period a year ago.
Sales decreased in all key markets as the average selling price slid to 65 euros from 71 euros in the previous quarter. However, sales in North America, not a key market for the Finnish firm, increased by 21 percent. Nokia reiterated it saw global mobile device volumes falling around 10 percent in 2009 year-on-year. The company aims to achieve some 700 million euros in savings over the next two years as part of a restructuring plan announced last January.
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