Nokia Profit Tumbles 66 Pct in Second Quarter

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Finland’s Nokia is the world’s largest maker of mobile handsets, but the worldwide economic downturn is having a major impact on the company’s business. After a harrowing first quarter that saw Nokia’s profits contract 90 percent compared to the year before, the company has posted its second quarter results…and they sure aren’t pretty. According to Nokia, its second quarter earnings dropped 66 percent for €380 million, down from €1.1 billion for the same quarter a year ago. Nokia is also trimming its market share and revenue forecasts, now saying it doesn’t expect to expand its share of the mobile market at all this year.

“We are balancing short-term priorities with our longer-term growth ambitions as elements of the mobile handset, PC, Internet, and media industries converge to form a new industry,” said Nokia CEO Olli-Pekka Kallasvuo, in a statement. “Consumers will increasingly expect devices and services designed as integrated solutions. To capture this opportunity we are accelerating our strategic transformation into a solutions company.”

For the quarter, Nokia shipped 103 million mobile handsets, down about 15 percent from the second quarter of 2008. However, the average selling price of a Nokia device dropped from €74 last year to €62 this year, a development that has cut into the company’s profits.

In addition to rolling back forecasts to increase its market share during 2009, Nokia downgraded the financial outlook for the Nokia-Siemens joint venture.

Mobile phone sales have dropped sharply worldwide in the economic downturn, with global shipments of mobile handsets down 13 percent fo about 245 million units in the first quarter of 2009, according to market analysis firm Strategy Analytics, which represents the sharpest downturn since the mobile phone business took off in the 1980s. Despite the growing popularity of smartphones, many tight economic conditions mean many consumers are scaling back their mobile usage and putting off replacing or upgrading phones.

Nokia’s share of the worldwide phone market did climb to 38 percent in the second quarter, up from 37 percent in the first quarter of 2009; however, both figures are down from a 40 percent share last year. Overall, Nokia expects 2009 sales for the entire mobile industry to be off about 10 percent from 2008 levels.

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