Nokia Brilliant Earnings Driven By Smartphones, Will Slash 1,800 Jobs
October 21, 2010 by Douglas A. McIntyre
Almost no one expected Nokia (NYSE: NOK) to post strong third quarter earnings, but it did. Revenue rose 5% to 10.27 billion euros. Operating profit rose to 423 million euros from a 426 million euro loss in the same period last year. The company said it would fire 1,800 people to improve gross margins and streamline operation.
New CEO Steve Elop has only been with the company for a month, so the move shows that he plans to increase the pace of restructuring the firm. Nokia’s third-quarter earnings per share dropped to 0.14 euros from 0.18 euros a year ago, but beat all forecasts, which ranged between 0.08 to 0.12 euro in a Reuters poll of 36 analysts.
Shares rose almost 8% on the news.
While units sales rose, it was the smartphone sales that were impressive. Nokia total mobile device volumes of 110.4 million units, up 2% year-on-year and down 1% sequentially. Nokia converged mobile device (smartphone and mobile computer) volumes of 26.5 million units, up 61% year-on-year and 10% sequentially.
The numbers showed that the world’s largest handset company is not out of the race in the smartphone market. Apple (NASDAQ: AAPL), Research In Motion (NASDAQ: RIMM), and Google (NASDAQ: GOOG) Android-based devices may have momentum, but Nokia’s 26.5 million smartphone unit sales is larger than what its smaller competitors did in their last reported period. Apple sold 14.1 million iPads in its recently reported quarter.
Nokia expects Devices & Services net sales to be between EUR 8.2 billion and EUR 8.7 billion in the fourth quarter 2010. Nokia now expects its mobile device volume market share to be slightly down in 2010, compared to 2009. Nokia earlier targeted its mobile device volume market share to be flat in 2010, compared to 2009.
“In the five weeks since joining Nokia, I have found a company with many great strengths and a history of achievement that are second to none in the industry. And yet our company faces a remarkably disruptive time in the industry, with recent results demonstrating that we must reassess our role in and our approach to this industry,” new CEO Steve Elop said. “Some of our most recent product launches illustrate that we have the talent, the capacity to innovate, and the resources necessary to lead through this period of disruption. We will make both the strategic and operational improvements necessary to ensure that we continue to delight our customers and deliver superior financial results to our shareholders.”
For Elop, the news is nearly meaningless. The people fired are a tiny part of the total employee base. The quarterly numbers were produced by his predecessor, and he only has a quarter or two to show Wall St. progress
Douglas A. McIntyre
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