Nokia - Global Company Nokia Rings Up Gains

Global Company Nokia Rings Up Gains
Strong worldwide demand for cell phones, especially outside its longtime European stronghold, helped Nokia beat analysts' estimates in ringing up a 20% increase in first-quarter per-share profit and a 28% jump in sales.
The Finnish company, the world's No. 1 maker of mobile phones, says its market share rose to 35% from 32% a year ago.
The company, which reported its latest results on Thursday before regular stock trading began, recorded big gains in unit sales in China, Asia and Latin America.
"Nokia is seeing the benefits of an early entry into emerging markets," said RBC Capital Markets analyst Mark Sue.
Nokia said sales rose to $11.7 billion from $9.12 billion in the year-earlier quarter. Per-share profit rose to 30 cents from 25 cents. Analysts expected 25 cents.
The company's U.S. shares rose 4.9% Thursday to a more than two-year high of 22.81.
The company said the average selling price of its phones fell 6.4% from the year-ago quarter to $126.90, but rose 4.1% from the fourth-quarter ASP of $121.94.
Nokia executives said unit cell phone sales industrywide fell 12% last quarter from the fourth quarter, but that its own unit sales fell just 10%. Fourth-quarter sales get a bounce thanks to the holidays and companies making year-end purchases, so a sequential decline in the first quarter is typical. Nokia said industrywide unit sales rose 27% from first-quarter 2005, while its own unit sales rose 40%.
It reiterated its assertion that emerging markets such as China would drive its growth in 2006. Nokia says last quarter marked its 11th consecutive quarter of market share growth in China. It says eight of the 10 best-selling phones in China are Nokia models.
"We anticipate approximately 70% of industry volume growth to come from emerging markets," Nokia President Olli-Pekka Kallasvuo said Thursday, in a conference call with analysts.
"Our position in the fastest-growing markets of the world continues to be extremely strong," said Nokia CEO Jorma Ollila, who also spoke on the conference call. Besides China, he says Nokia is the market leader in India, Russia, the Middle East and Africa, and the southeast Asia-Pacific region.
And executives say emerging markets don't necessarily mean sales of the lowest-cost phones to new users. Like Europe, the U.S. and other established markets, these regions also are upgrading.
"We estimate about 50% of the units in emerging markets are replacement units. That's a huge advantage to a company that's established the leadership position that Nokia has," said Richard Simonson, Nokia chief financial officer, on the conference call.

In the first quarter, Nokia sold 61.6% of its mobile devices outside the U.S. and Europe. While it still sold more units in Europe than any other region, at 20.4 million phones, that region saw the smallest rise in year-over-year unit sales, at just 17%.
And unit sales in Europe fell 32% from the fourth quarter, the worst showing of any of the six regions tracked by Nokia.
"You know, Europe is not the whole world," Simonson told analysts. He said Nokia's sales would rise in Europe this quarter and next, helped by new products in the competitive U.K. and German markets.
Analyst Sue says Europe still matters a lot to Nokia. "It does have higher gross margins (than other regions)," Sue said. "It's a matter of Nokia entrenching its position while fending off competitors."
One of the ways Nokia will try to expand in all markets is by introducing more new products than usual this year, Sue says. This, he says, also will help maintain ASPs.
"Nokia is less focused on reducing price points," he said. "They're seeing a refresh in products, and they're planning on shortening the product cycles."
Company executives said Nokia expects to maintain its 35% market share in the second quarter. It expects unit sales industrywide will rise 15% through 2006.