Nokia reports massive drop in profits

April 17, 2009 | 10:02

Tags: #credit-crunch #phone #profits #smartphone

Companies: #google #nokia

Finnish mobile giant Nokia is continuing to suffer at the hands of the slowing global economy with an astounding drop in net profits.

As reported by CNet, the company saw its net profits drop for the first quarter of this year by a staggering 90 percent – far below analyst and investor expectations.

Although the company was still able to turn a profit of €122 million – which at first glance sounds cheering – this contrasts markedly with the figure for the same quarter last year, which was a far healthier €1.22 billion. The massive dip is worse than industry analysts had feared, with earlier predictions putting this quarter's profits at €306 million.

The main blame for the dip – which was accounted for by higher costs and a 19 percent year-on-year drop in handset sales – is placed firmly on the poor economy. Chief executive Olli-Pekka Kallasvuo said that “extensive destocking by operators and distributors [...] adversely impacted our sales volumes in the quarter.” A drop in average handset price from €71 to €65 also impacted earnings.

The good news for Nokia is that the worst could be over: with the company managing to hold on to its 37 percent market share despite slowing sales, things should start looking up soon. The company is also hoping that a predicted 10 percent drop in sales in 2009 will mostly be concentrated in the first half of the year, with things starting to look up later on.

While Nokia might be hurting from the sudden year-on-year dip, it's far from alone in the tech industry: even Google, with its seeming licence to print money, is feeling the sting with TechCrunch reporting that the company has shown a 3 percent dip in revenue for the first time in history.

Do you believe that Nokia needs to innovate its way out of the financial doldrums with a high-end iPhone killer, or should the company concentrate on recession-friendly low-end handsets? Share your thoughts over in the forums.
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