Nokia Stumbles in Smartphones

(Updates share price)

NEW YORK (TheStreet) -- Nokia (NOK) delivered a mixed picture as smartphone sales and margins slipped sharply but earnings and sales beat Wall Street targets.

The Finnish phone giant posted adjusted earnings of 17 euro cents or 26 cents a share, down 48% from the year-ago quarter, but well above the 18-cent pro forma profit analysts were looking for, according to Yahoo! Finance.

Sales for the third quarter ended last month were 9.8 billion euros or $14.6 billion, a 20% decline from last year's level, but slightly better than the $14.2 billion revenue estimate analysts expected.

Nokia Booklet's Price Problem

Intense price competition from phone rivals like Samsung and LG as well as smartphone makers like Apple (AAPL) and Research In Motion (RIMM) helped crush Nokia's margins in the third quarter. Gross margin in Nokia's phone business narrowed to 30.9% from 34% in the second quarter, and operating margins shrank to 11.4% from 12.2% in the same period.

Nokia sold 108.5 million phones, slightly better than the 107.5 million analysts were expecting, and the average sale price per phone was $92, roughly in line with analysts' expectations. Nokia says its market share remained 38%, a positive development considering some analysts had feared a significant drop to as much as 35%.

In smartphones, Nokia continued to show disturbing weakness. Nokia sold 16.4 million smartphones, down from the 16.9 million in the second quarter. This decline was reflected in Nokia's marketshare projection for the third quarter, which was 35%, and down from the 41% in the second quarter. Nokia blamed component shortages like camera modules for its miss on smartphones.