Nokia's sales for the enterprise solutions division were the lone disappointment in the Finnish vendor's otherwise robust first-quarter earnings report, which was released today.
The vendor reported that net sales for the unit fell 39 percent to €186 million (US$229 million), compared with €307 million ($379 million) in the first quarter of 2005. Net sales were down everywhere except China and North America.
Nokia's earnings report followed by two days that of Motorola Inc. (NYSE: MOT), which reported similarly soft results for its network equipment business. Network equipment sales for the quarter were $1.43 billion, down 14 percent compared with the same period last year for Motorola.
It is clear that Nokia has a lot riding on the e-Series in the enterprise space. The shipping situation is unlikely to improve over the next quarter either.
"The Nokia e-Series products are not expected to reach big volumes until the third quarter," says Nokia CFO Rick Simonson.
The enterprise results are in marked contrast to the rest of Nokia's first quarter, particularly in overall handset sales. The The company shipped 75.1 million mobile phones during the quarter, up 40 percent on last year. Total net sales rose 29 percent over 2005 to €9.51 billion.
Here's how Nokia's results break down:
Table 1: Nokia's first quarter by division
| EUR million | Q1/2006* | Q1/2005** | Change (%) |
| Net sales | 9 507 | 7 396 | 29 |
| Mobile Phones | 5 869 | 4 527 | 30 |
| Multimedia | 1 758 | 1 133 | 55 |
| Enterprise Solutions | 186 | 307 | -39 |
| Networks | 1 699 | 1 431 | 19 |
| Operating profit | 1 367 | 1 118 | 22 |
| Mobile Phones | 1 085 | 869 | 25 |
| Multimedia | 323 | 155 | 108 |
| Enterprise Solutions | -66 | -9 | |
| Networks | 149 | 221 | -33 |
| Common Group Expenses | -124 | -118 | |
| Operating margin (%) | 14.4 | 15.1 | |
| Mobile Phones (%) | 18.5 | 19.2 | |
| Multimedia (%) | 18.4 | 13.7 | |
| Enterprise Solutions (%) | -35.5 | -2.9 | |
| Networks (%) | 8.8 | 15.4 | |
| Net profit | 1 048 | 863 | 21 |
| EPS, EUR | |||
| Basic | 0.25 | 0.19 | 32 |
| Diluted | 0.25 | 0.19 | |
— Dan Jones, Site Editor, Unstrung
Meanwhile, RIM's making a 60% gross margins on BlackBerry. And everyone is giving away mobile e-mail software.
Without a software business, there's not much room for resellers. And so we go back to a vicious cycle where everyone relies on the wireless operators as the primary distribution channel.