Nokia delivers strong financials, gains share: Healthy outlook eases some concerns of macro-economic cooling

Nokia Corp. today displayed the results of a well-oiled, money-making machine with 34% and 44% jumps in revenue and profit, respectively, for the fourth quarter compared to the year-ago quarter.

Handset volumes reached 133.5 million units in the fourth quarter, up 27% year-on-year, enough to claim its long-sought global marketshare of 40%.

Nokia’s stock climbed 8% to $35.07 by midday, buoyed by the good news.

Margins reached a “gargantuan” 25% in its volume-oriented mobile phone division with 21% margins for multimedia phones, said analyst Mark McKechnie at American Technology Research.

Handset market safe from economy concerns

The upshot?

“Nokia’s results gave a clean bill of health to the handset industry,” McKechnie said. “There are macro winds of concern blowing and Nokia addressed that on its earnings call by confirming its outlook that the handset industry will see 10% annual growth this year.”

“The big question is whether, as in last year’s case, that 10% forecast turns out to be as conservative as it was last year,” the analyst said.

U.S. questions

McKechnie said that his sources indicate Nokia is ramping up staffing at its San Diego offices, dedicated to developing products for the United States, where the Finnish giant has slipped in share. But its renewed effort here is, in part, taking advantage of Motorola Inc.’s continued woes, the analyst said. (Motorola dominates the U.S. market with an approximately one-third share, down a couple points in the past year.)

According to analyst Tero Kuittinen at Avian Securities, L.L.C., however, the numbers for Nokia’s performance in the U.S. tell a different story.

The U.S. market was “weak as always, with little sign of life,” said Kuittinen.

“This was another demonstration that Nokia doesn’t really need North America,” Kuittinen said. “It can dominate by performing well in Europe and Asia.”

Overall, Nokia earned $23.1 billion in revenue and $2.7 billion in net profit for the fourth quarter. Year-on-year, the Finnish giant earned $75.1 billion in revenue and $10.6 billion in net profit, jumps of 24% and 67%, respectively.

Nokia’s device average selling prices (ASPs) actually increased to $122 from $121. But unit growth far outpaced the effects of static ASPs, according to McKechnie.

Kuittinen, who has written on the concept that handset sales growth in “Chindia” – China and India’s hot subscriber growth combined – may reflect growth in the overall market, said that China showed a typically weak fourth quarter. The first calendar quarter typically is stronger, in part due to the Chinese New Year in January. And growth in India appears unabated, though Nokia does not break out that country from its Asia-Pacific numbers.

As for Nokia’s projection of 10% growth, Kuittinen said that weakness in consumer spending showed up late in the fourth quarter and may become more apparent in quarterly results to come this spring or summer. In contrast to McKechnie’s view that 10% may be conservative, Kuittinen took a more cautious view.

“Reaching 10% growth this year will be challenging, given the macro-economic trends,” he said.

Regarding Nokia’s keen ambitions to move from an identity as a hardware manufacturer to an “Internet company,” Kuittinen said that the vendor’s “real upside came purely from basic handsets.”

“The N-gage has been delayed time and again and the Ovi (music and multimedia) service remains up in the air,” Kuittinen said.