Updated from 7:47 a.m. EDT
disappointed with its third-quarter earnings report, as net income slid nearly 30% from a year ago, although the handset maker offered an optimistic view of mobile-phone unit growth for the last quarter of the year.
The Finnish mobile-phone giant posted earnings for the quarter of 29 euros a share, falling from a profit of 40 euros a share in the year-ago period. Excluding a restructuring charge and other one-time items in Nokia Siemens Networks and the acquisition of digital mapmaker
, Nokia notched a profit 33 euros a share.
Sales for the quarter ended last month were 12.2 billion euros, down 5% from a year earlier and 7% sequentially. Analysts on average expected Nokia to post a profit for the second quarter of 1.22 billion euros, or 33 euros a share, on sales of 12.8 billion euros, according to
On the positive side, Nokia said adjusted gross margin increased to 35.7% from 34.5% a year earlier as a result of an agreement with
and certain other license agreements concluded during the third quarter.
"As a result of our strong operational management and market position, Nokia was able to achieve solid margins and operating cash flow of 1.3 billion euros for the third quarter of 2008," CEO Olli-Pekka Kallasvuo said in a press release. "With our scale, brand, improving product portfolio and low cost structure, we believe Nokia is well-positioned for the current times."
Handset shipments hit 117.8 million in the quarter, Nokia said, coming in slightly below expectations. Shipments were up 5% from a year ago but down 3% from the previous quarter, cutting Nokia's market share to 38% from 39% a year ago and 40% sequentially. The average selling price of its mobile devices slipped to 72 euros, down from 74 euros sequentially.
Nokia had tempered expectations for the third quarter with a preannouncement in September, when it said it expected its mobile device market share in the third quarter to be lower sequentially. That outlook reflects its decision to not meet certain aggressive pricing of some competitors, increasing competition and the temporary impact of a slower ramp-up of a mid-range device.
"Nokia's unit volumes and
average selling price disappointed - but it's an oddly triumphant moment, because the handset operating margins were rock solid at 18.6%," says Tero Kuittinen, senior executive director of global equity research with Global Crown Capital. "We will gorge on the grief of simultaneous volume and price declines in coming quarters, but Nokia is showing it can take punches and roll with it."
Looking ahead, Nokia said it expects industry mobile device volumes in the fourth quarter to be up sequentially from 310 million units in the third quarter. Nokia's management once again endorsed a 10% year-over-year global market unit growth to 1.26 billion, which analysts expect will allay concerns of a broad industry slowdown.
Nokia added that it continues to target an increase in its market share in mobile devices in 2008, although for the fourth quarter the company expects mobile device market share to be at the same level or slightly up sequentially.
Kuittinen argues that Nokia's outlook would have been poorly received two months earlier, but after the global panic of the past week, the guidance is likely to give shares a boost unless the general global selloff gathers momentum.
"It's clear that the guidance is stronger than expected. Nokia is guiding its volumes up sequentially and its market share to be flat or slightly up sequentially into
the fourth quarter," Kuittinen says. "Nokia is also now guiding global handset volume growth to 10.5% for 2008 -- a positive move under these circumstances."
After falling nearly 13% during the previous session, shares of Nokia were 2.2% higher at $15.44. Competing phone maker
was trading down 1.2%, while Qualcomm tacked on 0.9%.
, which will see its
joint venture post results Friday, was up 5.4%.