Nokia posts strong Q2, but U.S. handset business still lags

Nokia Corp. reported strong financial and market share numbers for the second quarter, notching a two-point gain in global market share to hold 38% of the world market for mobile phones at the end of the quarter.
The Finnish vendor’s overall revenue reached $17.2 billion, a 28% increase over the year-ago quarter. Operating profit reached $3.2 billion, a 57% jump over the year-ago quarter. Net profit reached $3.9 billion, a 148% increase over the year-ago quarter. Handset shipments reached nearly 101 million units, up 29% from the year-ago quarter.
In context, Nokia shipped nearly triple the volume of handsets in the quarter compared with its next closest rival, Samsung Electronics Co. Ltd., which shipped 37.4 million units.
Nokia’s gains exceeded market forecasts and its stock traded up as much as 8% after the news.
Though the Finnish handset giant posted double-digit, year-on-year gains in nearly every region of the world-from 21% in Latin America to 36% in China/Asia to nearly 37% in the Middle East and Africa-the vendor posted a 21% decline in shipments to the United States.
The declining number of units shipped to the U.S. was somewhat at odds with recent data on U.S. retail sales from Strategy Analytics that showed Nokia gaining 1.5% for the quarter. Retail sales, however, can reflect gains with consumers while shipments decrease, presumably to stabilize inventory.
The other dim spot for the vendor was its new joint venture, Nokia Siemens Networks, which lost $1.7 billion during the quarter, of which $407 million was due to costs related to the joint venture.
Nokia CEO Olli-Pekka Kallasvuo credited the company’s device business for its robust quarter. The networks business, however, was weak and he said that “adverse developments require decisive action.” Kallasvuo said that the two companies in the joint venture would accelerate and increase the JV’s “cost synergies target.” Whether that implied deeper job cuts at the new unit remains to be seen.
The company’s overall operating margin was 18.7%, up from 15.3% in the year-ago quarter. Operating margins in mobile phones and multimedia devices were virtually identical, reaching about 21%, up from more than 16% in the year-ago quarter. Analysts have been awaiting the margin numbers to see whether Nokia’s price cuts on products shipped into emerging markets to counter its rivals would dampen margins. It appears they did not.