Nokia has issued better-than-expected Q1 results.
In stark contrast to other mobile companies, Finland’s Nokia today reported a 22% increase in Q1 sales to $7 billion, with a 15% rise in net income to $880 million, thanks to a growth in market share and a reduction in costs. These results exceeded the company’s expectations and allowed it to predict growth of 20-30% for the remainder of the year. Not surprisingly, Nokia also experienced a rise in share price. It had fallen by 45% since December last year, but has now started the climb back with a 5.7% rise to 35.49.
The achievement was made all the more impressive by the recent poor performance of its competitors. Ericsson, the third biggest mobile phone maker, today announced that in an attempt to prevent further losses in Q2 it is cutting 12,000 jobs. Second-largest player Motorola said earlier this month that it expects its losses to increase in Q2, despite also shedding jobs.
Obviously Nokia has had to be ruthless to achieve such results in the current climate and its suppliers have suffered as it strives to keep costs to a minimum. But the strategy seems to be paying off in the medium tern, as it looks forward to 20% growth and wallows in double the market share of its nearest rival.
There are a few clouds on the horizon. The threat from Asian firms in Nokia’s core European market will intensify as 3G handsets become a reality, since Japanese and Korean manufacturers will have more experience in these highly complex devices. At the same time, the mobile handset market is undeniably slowing as penetration rates increase and people delay replacing phones. Nokia needs to ensure its brand image and technology remain ahead of the competition, otherwise it could see its head start eroded. But for now, the firm’s earned the right to feel at least a little pleased with itself.
