Nokia profit falls 96 per cent

Sales drop 27 per cent as mobile phone giant feels effects of "exceptionally tough" market

Nokia's sales have been hit hard

Nokia has reported a 27 per cent year-on-year drop in sales and a 96 per cent fall in operating profit as mobile phone sales plummet in the recession.

The Finnish mobile giant achieved first quarter revenue of €9.3bn (£8.2bn), down from €12.7bn (£11.3bn) in the same period last year. Operating profit was just €55m (£48.7m), compared to €1.5bn (£1.3bn) in 2008.

Mobile device sales reached 93.2 million units in the quarter, down 19 per cent year on year. The steepest declines in percentage terms came in Latin America (down 44.5 per cent), Middle East / Africa (down 26.7 per cent) and Asia-Pacific (down 17.3 per cent). In Europe, phone sales fell 13.2 per cent, although Nokia said it achieved a slight increase in market share in the region.

Nokia chief executive Olli-Pekka Kallasvuo said the market has been “exceptionally tough”, but believes that demand is at least becoming more predictable.

“We continue to invest in a focused manner in consumer internet services delivered across our broad portfolio of mobile devices. Combined, these solutions will drive our future growth,” he said.

“Regarding the health of the overall mobile device market, the inventory already in the sales channels decreased substantially during quarter one due to extensive destocking by operators and distributors. This adversely impacted our sales volumes in the quarter. However, it has also resulted in the demand picture becoming more predictable as we enter the second quarter."

But that predictability does not mean better sales – Nokia is forecasting a 10 per cent drop in mobile phone unit sales this year, although the firm expects the decline to be worse in the first half of 2009, suggesting the market may pick up as 2010 approaches.

Nokia said it expects to increase its share of the market this year.

Last month, the firm revealed plans to shed 1,700 jobs globally as part of a cost-cutting strategy announced in January. The company said then that it would cut costs by €700m (£647m).