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Nokia Takes Handset Hit

Growth at Nokia Corp.'s (NYSE: NOK) infrastructure division provided the only ray of light for the Finnish vendor today, as a 15 percent fall in handset sales dragged down first-quarter overall net sales and pummeled operating profit (see Nokia Q1 Sales Fall 2%).

The world’s largest handset manufacturer recorded a 2 percent year-on-year fall in net sales to €6.6 billion (US$7.9 billion), resulting in a massive 17 percent decline in operating profit (€1.13/$1.36 billion compared to last year’s €1.37/$1.65 billion).

The company’s loss of form in the device market has taken the shine off an impressive performance in the infrastructure sector. Network net sales increased 16 percent to €1.4 billion ($1.7 billion), with a whopping 114 percent year-on-year increase in the division’s operating profit to €182 million ($219 million).

Handset issues naturally dominated the vendor’s conference call with analysts, but chairman and CEO Jorma Ollila was keen to praise the company’s efforts to turn around its network fortunes and tout recent 3G success (see More Finns Finished, Nokia Suffers 3G Blow, and Nokia Networks Dutch T-Mobile).

“I am very pleased with the progress of the networks division… We believe that our [total] Wideband-CDMA infrastructure sales of €2.2 billion [$2.6 billion] makes us a joint leader in 3G Wideband-CDMA [with LM Ericsson (Nasdaq: ERICY)]. As of now we are a supplier to nine of the 21 commercially launched Wideband-CDMA networks and are rolling out networks to another 26 carriers in 15 countries.”

Looking ahead, Ollila expects the infrastructure market to continue its recovery, though he declined to forecast a specific figure for growth. “The company expects the market to develop steadily and estimates that the overall market will be slightly up compared to last year in euro terms in 2004… Obviously, there is a pickup in the market and there will be growth for the networks business.”

Nokia also used today’s announcement to play down fears it is attempting to split the market for push-to-talk over cellular (POC) services (see Nokia Pushes Off). “Nokia is actively participating in the creation of open standards for POC within the Open Mobile Alliance (OMA), and all of Nokia’s POC networks products will be upgradeable to the OMA standard once it is available,” the company said in a statement.

Nokia shares have fallen, subsequent to today’s figures, down 9.31 percent to €12.25 ($14.74) per share at press time.

— Justin Springham, Senior Editor, Europe, Unstrung

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