LONDON — While Nokia's handsets operations grabbed most attention as the company reported its second quarter financial results, perhaps the most impressive part was how Nokia Siemens Networks put its first year of integration and growing pains behind, with sales and margins that far exceeded analysts' expectations.
Overall Nokia said sales for the quarter were up 4 percent to Euros 13.15 billion while shipments of mobile terminals climbed 21 percent compared to the same period last year to 122 million units, giving the Finnish firm a 40 percent global market share, up from 38.5 percent at the same period last year.
But within that, the infrastructure, software, and services group that is a joint venture with Siemens reported second-quarter revenues of Euros 4.07 billion ($6.45 billion), an 18 percent improvement compared with a year earlier, and 20 percent better than the first quarter of this year.
Instead, sales at the handsets business came in at Euros 9.1 billion ($14.4 billion), one percent lower than for the same period last year, and down 2 percent compared with the first quarter of this year.
However, because these were in line with expectations and were accompanied by an upbeat outlook from Nokia CEO Olli-Pekka Kallasvuo, the company's shares roared ahead most of Thursday (July 17) on the Finnish exchange.
The infrastructure group put its 18 percent sales leap down to last year's poor second quarter, but financial analysts had not expected much more than a few percentage points in growth. For example, as noted by sister site Light Reading analysts at Dresdner Kleinwort had anticipated Nokia Siemens revenues to grow by just 1 percent.
Even more surprising, NSN almost reached an operating profit. Its operating loss (including one-time costs and special items) was Euros 47 million ($74.5 million), a dramatic improvement from last year's operating loss of Euros 1.27 billion ($2 billion).
Excluding the one-time costs and special items associated with the ongoing integration process, Nokia Siemens achieved an operating profit of Euros 154 million ($244 million), compared with a loss a year earlier of Euros 361 million ($572 million).
NSN is implementing a tough product selection policy and vowed to invest only where it can make money and be a market leader, says it's on course to achieve its target of delivering Euros 2 billion ($3.2 billion) in annual cost savings by the end of this year.
Focusing on the handsets side, one financial analyst, Richard Windsor, of Nomura Securities, in an email to EE Times noted that Nokia has weathered the poor economic climate and the strength of the dollar admirably.
"The outlook has also brightened as Nokia will be shipping many more new devices in volume in H2 08 which will help underpin profitability", which is why Nokia remains Nomura's favourite stock in Europe.
Windsor particularly welcomed Nokia's ability to hold margins steady in the face of declining average selling prices for its handsets.
But he cautioned that smartphones are an issue. "Nokia is far from being in trouble here, but a lot depends on the new User Interface (UI)." This, dubbed the s605.0 , should be available first on the touch-based device Nokia is readying and plans to launch later this year.
Nokia admits that it has lost share in this increasingly important sector, but says it has plenty of new products coming. But the problem is not with products but with the user experience which remains light years behind both Apple and HTC.
