| Ringing in the money
London, Oct. 18: Nokia, the world’s largest cell phone maker, appears to have mastered a trick that has eluded one competitor after another: making money in a deep industry slump.
Though its sales ticked up only slightly in the third quarter, according to figures released Thursday, Nokia managed to triple its net income from the period a year ago. The results show how efficiently Nokia controls its costs and negotiates prices with suppliers, analysts said.
Consumer demand for new handsets has been cooling, in part because mobile phone companies have been slow to roll out promised new networks and digital services. Meanwhile, the cash-short phone companies are reluctant to invest in the new networks until consumer demand picks up again. The equipment makers, caught in the middle, have had to slash forecasts and rein in costs.
Nokia’s adeptness at doing that made for a rare bit of good news for the sector’s investors, who sent Nokia’s American depository receipts soaring 11 per cent, to $ 16.60.
Nokia reported net income for the period ended September 30 of 610 million euros ($ 598.8 million), up from 186 million euros ($ 182.6 million) in the quarter a year earlier. The figure for the 2002 quarter includes a charge of 306 million euros related to loans to MobilCom, a troubled German phone company, along with amortisation of goodwill and other special charges.
Sales for the period grew 2 per cent, to 7.2 billion euros ($ 7.1 billion), in the middle of the range Nokia had most recently forecast. The company has lowered sales targets five times this year, most recently in September, from a previous estimate of 7.6 billion euros.
Nokia continues to dominate the handset market, where its share is twice that of Motorola, its closest competitor. Profits for this division grew 25 per cent, to 1.2 billion euros, in the quarter. Handset sales, which account for four-fifths of the company’s overall sales, rose 7 per cent, to 5.6 billion euros.
Sales have begun to pick up as consumers have started trading in old phones for newer models with colour screens and special features, like the ability to transmit digital photographs. The models’ slightly higher prices are the source of most of Nokia’s revenue growth. In unit terms, handset sales were up just 1 per cent, Nokia reported—though that figure had been falling.
“The market for handsets is slowly and steadily recovering,” said Thomas Langer of WestLB Panmure.
Selling the equipment that phone companies use to provide mobile phone service is the other big component of Nokia’s business, but that area remains in a deep slump. Network sales fell 7 per cent, to 1.5 billion euros. But the division’s loss narrowed to 250 million euros in the period; in the quarter a year ago, it lost 585 million euros.