Nokia reports shock Q3 loss on NSN writedown

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Nokia reports shock Q3 loss on NSN writedown

By CAROLINE GABRIEL

Published: 15 October, 2009

READ MORE: Financial | Nokia Siemens Networks | Nokia | Handset | Financial

Continued ...

Kallasvuo, commenting that this has been the toughest economic environment the vendor has ever experienced, lowered profit guidance last quarter, saying operating margin would be flat amid pressures in demand, pricing and component shortages.

Nokia's shares traded up by 4% on the eve of its results call, at €10.44 in Helsinki, but fell back on the NSN shock - that's down from €13.52 a year ago, reflecting the general pattern for Nokia through the downturn - negative but not disastrous. Didier Scemama at RBS is one of the analysts maintaining buy ratings on Nokia because of its huge scale, which makes it virtually untouchable in a business that increasingly relies on volume and supply chain efficiency.

Nokia has launched 12% more products so far this year than at the same stage in 2008, even while the market is down by around 13% in volume, so is clearly preparing for the upturn and to sustain its market share, which it always targets at 40% (it was 39% for 2008). But this means R&D costs could weight on profits for the coming year at least.

Nokia will have shipped about 108m handsets into its channels in the quarter, up from 103.2m in Q2, as inventory has normalized. This is still down on 117.8m a year earlier. Nokia claims about 57m active users of its web services and it targeting 300m by the end of 2011.

"They can get away with just restating their guidance as long as there are signs that the margins in the device business are turning up in the fourth quarter," said Jan Ihrfelt at Swedbank Markets, which also has a 'buy' rating on Nokia. Of the 64 analysts who cover Nokia, 31 rate it a 'buy', 15 a 'sell' and 16 a 'hold'.

On the bright side, Nokia is expected to hold its market share steady at about 38% and its recent launches position it well to grab back share of the smartphone segment too. It already sells 12 of the world's top 20 selling smartphones and seven of the top 10 bestsellers overall, and will be looking to boost its record further with the N97, N900, N97 Mini and Booklet 3G.

Booklet 3G comes to Germany and the US first, with O2 and AT&T offering it within a few weeks. O2 will launch on October 22 and price it at €249 ($370) with an additional monthly charge of €20 over 24 months. There will also be an optional flat rate data tariff which will cost €25 per month. AT&T will sell it via Best Buy for $299.99 with a two-year, $60-a-month contract, shipping in mid-November. Contract-free, the netbook will cost $599.

Meanwhile, RIM is unleashing the BlackBerry Storm 2 at Vodafone, and it has been pre-released at Verizon Wireless too. Like its predecessor, the phone was codeveloped with Vodafone with an eye on enhancing RIM's appeal to high end consumers, a key element of its strategy to stay relevant alongside the other smartphone vendors, but one that investors fear will hit its profitability because of lower selling prices and increased marketing costs. Storm 2 features a revamped touchscreen interface to make input easier, and the belated addition of Wi-Fi. Like the first model, it is a worldphone with CDMA and GSM support.

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