U.S. News

Nokia Second-Quarter Earnings Beat Forecasts, Shares Jump


Strong cell phone demand in emerging markets and in Western Europe boosted Nokia's second-quarter sales and profits, sending its shares to their highest level in more than five years.

Nokia said on Thursday its underlying second-quarter earnings per share rose to 0.32 euros, compared with expectations of 0.25 euros in a Reuters poll, when adjusted for the performance of its networks venture with Siemens .

Shares in Nokia were 7% higher at 22.05 euros, levels they last saw in early 2002.

Nokia, the world's largest cell phone-maker, said it expected global sales of mobile phones to grow 10% this year from 978 million phones in 2006, compared with its earlier forecast of at best 10% growth.

Operating profit margins at all three of Nokia's handset units -- mobile phones, multimedia and enterprise solutions -- increased sharply year-on-year and beat analysts' forecasts.

"Nokia was able to raise their handset margins really much more significantly than expected, and that's the dominating factor in these results," said Danske Markets' analyst Ilkka Rauvola.

"That's because of the decline Motorola is experiencing, and Nokia seems to be taking a big chunk of the vacuum being left by Motorola," he said.

Nokia CEO on Second-Quarter Earnings

Nokia's closest rival for years, U.S.-based Motorola, has reported losses so far this year as it failed to win more business from Nokia in the lower end of the market.

"Nokia has scale benefit compared with its competitors. The firm's mobile phone portfolio is very competitive at the moment in high and low-end phones and has improved significantly in mid-price section," said analyst Lauri Rosendahl from Carnegie.

Nokia sold 100.8 million phones in the quarter, more than its three closest rivals combined, and estimated its market share at 38%, above analysts' consensus of 37.7%.

Average selling price of cell phones in the second quarter was 90 euros, compared with the average forecast of 90 euros in the poll and 89 euros in the first quarter.

The Finnish company has a strong lead in emerging markets such as China and India, which it has been fiercely defending.

Nokia posted a 28% rise in global sales to 12.59 billion euros, below analysts' average forecast of 12.92 billion.

Nokia Siemens Networks, which started operations in April, revealed last week that it booked one-off charges of 905 million euros in the quarter, mostly due to restructuring, but Nokia said it also made a 64 million euros operating loss.