Nokia Q2 results show continuing decline

Further pressure on CEO Kallasvuo as profits tumble

Nokia has logged Q2 profits of just €227m on sales of €10bn

Nokia has published its second-quarter results, revealing a 40 per cent slump in profits compared to the same period last year.

Profit for the period amounted to just €227m (£191m) on sales of €10bn (£8.4bn), up 0.9 per cent year on year and up five per cent on the first quarter.

The stock markets had been bracing for disappointing results after Nokia issued its second warning in three months that the Q2 numbers were not likely to meet estimates.

But today's figures fell well short of the €285m (£240m) profit forecast of financial analysts polled by Bloomberg.

The Finnish mobile firm sold 111.1 million units during the quarter, up eight per cent year on year and three per cent on the first quarter. Smartphone shipments rose 42 per cent compared to last year, and 12 per cent from the last quarter, to 24 million units.

However, the increased shipments were offset by continued erosion of its devices and services gross margin to 30.2 per cent, compared to 34 per cent in Q2 2009 and 32.4 per cent in Q1 2010.

Even the company's Nokia Siemens Networks subsidiary posted net sales of just €3bn (£2.52bn), down five per cent year on year despite its acquisition of Motorola's legacy infrastructure business last week.

Nokia has failed to capitalise on stellar growth in the smartphone market driven by Apple, Google and RIM, and has struggled to make up a shortfall in smartphone market share following delays in the completion of its N8 device.

Mobile analysts have also highlighted the fact that Nokia lags behind rivals in the performance curve, and that it has lost two-thirds of the market value of its share since Apple launched the iPhone in 2007.

Speculation has been rife in recent days that Nokia is about to replace chief executive Olli-Pekka Kallasvuo. The firm has refused to comment on the rumours.

Kallasvuo pointed to continued growth in global smartphone market demand and Nokia's increased line of affordable handsets, stating that, despite facing continuing competitive challenges, Nokia "ended the second quarter with several reasons to be optimistic about our future".

The final straw for Kallasvuo may have come with yesterday's news that Apple's profits swelled by 78 per cent in the same quarter.