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Nokia's Cellphone Hope

Nokia Corp. (NYSE: NOK) painted a mixed picture today for its phone and networking businesses earnings over the first quarter. On the face of it, the news was almost all bad: The world’s largest phone maker reported a 90 percent profit drop for its handset business, to €122 million (US$161.3 million). Nonetheless, investors were cheered by a suggestion that the outlook may be stabilizing for the battered phone sector, pushing Nokia’s shares higher. (See Chaos in the Wireless World.)

Infrastructure chill
The future for its infrastructure joint venture, Nokia Networks , appears to be getting bleaker, however, as sales fell 12 percent year-on-year and 31 percent compared to the previous quarter. NSN reported its first-ever net loss of €122 million ($160.6 million), compared with a profit of €81 million ($106.4 million) a year ago.

NSN is now predicting that the market for telecom equipment will fall 10 percent -- compared to an earlier assessment of 5 percent -- during 2009.

Cellphones stabilizing?
Nokia is still predicting that mobile phone shipments will fall 10 percent from 2008 levels. It expects units in the second quarter to be flat or slightly up on the first quarter, and predicts that most of the industry pain will be inflicted in the first half of the year. Nokia itself sold 93.2 million handsets during the first quarter, down 19 percent from a year earlier. The Finnish vendor continues to lead the sector with a market share of 37 percent and blames the decline in the first quarter on inventory clear-outs. Nonetheless, The firm is also sounding a note of restrained optimism. "The market is no longer falling in a uncontrolled manner; I am encouraged by the signs of stabilization seen at the end of the first quarter," said Nokia Chief Executive Olli-Pekka Kallasvuo during the earnings call.

The company shipped 2.6 million units of its new 5800 XpressMusic device during the quarter, making it Nokia’s number one revenue-generating cellphone. (See Nokia Claims 5800's 3G Problems Are Fixed .)

Happy apps
The Services division, which deals with Nokia’s Ovi applications and download business, did also provide a modicum of cheer for the vendor. Nokia’s services business reported net sales of €150 million ($197 million), up 79 percent year-on-year but down 5 percent compared to the previous quarter. (See Nokia Beefs Up Map, Messaging Services.)

Overall, Nokia investors were buoyed by the firm’s suggestions that cellphones might be stabilizing. The firm’s shares were up nearly 10 percent, or $1.29, at $14.65 each in afternoon trading on the NYSE.

— Dan Jones, Site Editor, Unstrung

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