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The world's top cellphone maker Nokia shocked investors by taking a major writedown at its struggling networks unit and revealing a fall in its smartphone sales from the previous quarter.
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Shares in Nokia [NOK
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] fell Thursday, after the third quarter results.
The company booked a 908-million euros ($1.35 billion) hit from its Nokia Siemens Networks venture, citing challenging market conditions, and dragging the group to a reported loss per share of 0.15 euros compared with expectations of a 0.09 euros per share profit.
Nokia, battling aggressively with competitors Apple [AAPL
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] and RIM, [RIMM
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] also said its smartphones market share fell to 35 percent in July-September from 41 percent the previous quarter.
"Consumer demand may be showing early signs of improvement but these results show sustained pressure on smartphone margins. Apple's iPhone is defying gravity in the high tier," said CCS Insight analyst Geoff Blaber.
Analysts expect Apple, which started to sell its upgraded iPhone in June, to be one of the rare winners in the July-September period. It reports on October 19.
Siemens CFO Joe Kaeser had warned at end-September his firm might have to write down its 50 percent stake in NSN.
"Profit margins are under pressure ... Nokia needs to do some serious cost cutting to adjust to weaker demand," said Christian Blaabjerg, chief equity strategist at Saxo Bank.
Nokia is in the midst of cutting annual costs by 700 million euros at its key handset unit, which performed slightly better than expected in the third quarter as consumer demand for mobile devices started to improve in many markets.
Nokia shares are trading some 13 times next year's expected earnings, below many of its technology sector peers as its growth prospects are seen limited.
Problems in Smartphone Growth
Industry sales of more advanced models, so-called smartphones, rose 15 percent from the previous quarter, Nokia said, but falling smartphone prices are hurting top vendors.
"Nokia is launching plenty of new high-end smartphone models, such as the N900 and N97 mini. But as yet there is no iPhone killer to drive a major revival in its smartphone volumes," said Neil Mawston from Strategy Analytics.
"Nokia is still struggling in the U.S. smartphone market, and with competition intensifying in China as well, Nokia's battles can only get tougher in 2010," Mawston said.
HTC, the world's No. 4 smartphone brand, reported last week worse than expected results, underscoring intensifying competition and declining prices.
BlackBerry maker Research In Motion, the world's second-largest smartphone maker after Nokia, said on Sept. 24 its profit dropped 3.5 percent in the August quarter and gave an outlook that fell short of forecasts.
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