Nokia Q3 2009 results, converged device shipments slip slightly

Published by Rafe Blandford at 11:08 UTC, October 15th 2009

Nokia has released their Q3 2009 results, reporting an operating loss of EUR 426 million, but this was primarily due to a write down in the value of Nokia Siemens Network. Nokia's device and service division's profits were EUR 785 million, up 3% from the previous quarter, but down 50% year on year. Converged devices sales (smartphone) were down slightly (though up year-on-year) at 16.4 million, compared with 15.5 million units in Q3 2008 and 16.9 million units in Q2 2009. As such, converged device volumes were, perhaps, lower than expected.

Olli-Pekka Kallasuvo, Nokia CEO, said:

"The demand for mobile devices improved in many markets during Q3. With the average selling price of our devices holding firm quarter-on-quarter, our higher device volumes translated into increased net sales in our Devices & Services business. Our volumes and net sales were, however, somewhat constrained by component shortages we encountered across the portfolio. I also want to highlight the good operating expense management that helped the segment deliver solid earnings.

The challenging competitive factors and market conditions in the infrastructure and related services business necessitated non-cash impairment charges at Nokia Siemens Networks. We continue to support Nokia Siemens Networks actions to improve its performance."

Points of interest

Net profits were EUR -426 million, primarily due to a write down in the value of Nokia Siemens Network (EUR -1,107 million). Profits from the devices and services division were EUR 785 million, down from EUR 1,469 million last year, but up from EUR 763 million last quarter. The Navteq division also "improved", with a loss of EUR -68 million compared to EUR -80 million last year and EUR -100 million last quarter.
Nokia mobile device volumes were 108.5 million units, down 8% year on year but up 5% sequentially. This is set against estimated industry volumes of of 288 million units, down 7% year on year and up 7% sequentially. Nokia's overall market share was 38%, the same as Q3 2008 and the same as Q2 2009. Year on year market share was higher in Europe, Middle East and Africa, but lower in Greater-China, Asia Pacific and North America. Nokia noted that its devices sales were somewhat constrained by component shortages, which are expected to continue to some degree into Q4.

Net sales in the devices and service divsion were EUR 8,605 million, down 20% year on year, but up 5% sequentially. Operating profit in the division was EUR 785 million, down 50% year on year and up 3% sequentially. The year on year changes are largely the result of the economic climate, together with downward pressure on ASP.
Services and software net sales were EUR 148 million, representing 29% year on year growth and 6% sequential growth.
Converged device shipments (smartphones) were 16.4 million, of which 4.5 million were Nseries and 4.6 million were Eseries (mainly E71 and E75). This reflects continued poor sales for the Nseries, but relatively healthy Eseries sales ahead of the E52, E55 and E72 mass market availability. Nokia continues to face fierce competition in the high end consumer market from Apple, HTC and Palm.

This means that 7.5 million smartphone shipments were numbered Nokia S60 devices, reflecting Nokia's continued strategy of pushing 'converged' devices into the mid tier (e.g. the 5800 XpressMusic).

Converged devices sales were, perhaps, a little lower than expected, reflecting the continuing fierce competitive environment. The Q4 results will be watched with interest as many of Nokia's more recent device announcements start hitting the market.

Nokia converged device results over time
Nokia's estimated industry converged mobile device volumes (smartphones) were 47.0 million, compared to 44.2 million in Q3 2008 and 41 million in Q2 2009. Therefore, Nokia's share of the converged device market was estimated at 35% in Q3 2009, the same as Q3 2008, but down from 41% in Q2 2009.

Nokia Mobile Device Volume by Geographic Area:

(million units)	Q3/2009	Q3/2008	YoY Change	Q1/2009	QoQ Change
Europe	27.1	27.4	-1.1%	23.3	16.3%
Middle East & Africa	19.6	21.5	-8.8%	18.9	3.7%
Greater China	18.5	19.8	-6.6%	18.6	-0.5%
Asia-Pacific	30.5	33.6	-9.2%	30.3	0.7%
North America	3.1	4.5	-31.1%	3.2	-3.1%
Latin America	9.7	11.0	-11.8%	8.9	9.0%
Total	108.5	117.8	-15.4%	93.2	10.7%

The average device selling price was EUR 62, the same as the previous quarter. The average device selling price for converged devices was EUR 190, up from EUR 182 in the previous quarter.

Notes from the conference call

Q3 was a ,"solid quarter for Nokia Devices and Services business despite component shortages". Components shortages (e.g. camera modules) impacted the smartphone part of the business more than the rest of the portfolio . The component shortage also impacted other industry player.
The formation of the Solutions unit is an important structural change that improves Nokia's ability to execute and innovate.
Nokia shipped 1.8 million N97 devices, and 5.7 million touchscreen device £5% more than Q2 2009). Four further touch devices to start shipping in Q4: N97 Mini, X6, N900 and 5230 - something for everybody and there are more to come.
The sales decline in converged devices was mainly due to older devices, the newer devices performed well in sales.
Eseries devices sales were 4.4 million, the decline was primarily due to slightly slower E71 sales, but the E72 (the E71's replacement) starts shipping in Q4.
Ovi Mail has reached 2 million users (the growth, from one million users to two million users, took place in half of the time it took to reach one million users), Nokia Messaging now has 35 operator partners (doubled in 3 months).
EUR 908 million of Nokia Siemens Network good-will write down, no further good-will on the books.
In general remarks, while answering a question on whether Nokia would do an Android handset (no, obviously): Symbian will be extremely competitive due to its openness, innovation enablement and telecoms legacy, although there is much to be done ('user experience needs to improve')... in general on Symbian, 'there's so much we have in the pipeline'.

News Discussion

nj7

Not a great surprise...
Quarter a quarter, Nokia go down a little more, and they keep the same sales and marketing line:frown:

Ammar_Dento

Sadly it will be worse even there is E72,E55 and the N900. Only the combination of SYmbian^2,3,4 with markiting strategy and intelligent advertising for the software capabilities will change the bad situation.

And Nseries is begging. N98 with hell features is badly needed now and let it cost 1500$ at least people will dream about it like when they dreamed about N95 in 2007. I cant dream to touch the N97 (or N900) now!!!

Hih

They did little better than expected. N-Series is falling down like their market share/imago/stocks.

Nokia shares are diving deeply atm. No wonder though, after N97 and OVI flops. :P

Artz

According to the graph N-Series have definitely lost their charm.

sapporobaby

Actually losing a bit of marketshare will help Nokia to regain focus. Sometimes too large a marketshare is hard to maintain. One strategist was discussing this very thing in one of the Apple forums. He was saying that by not trying to garner certain markets, Apple is free to spread across several and maitain profiability. This seems to be working as they are well in the black and making a very tidy sum. If Nokia can sort of slim down some of its phone models and concentrate on those which the population seem to be clamoring for, they could do very nicely. The phone market has shown that there is enough room for many different brands and types. Nokia just has to position itself in these markets as a player, not necessarily as the most dominant.

BUSTAFONE

it all started with the iPhone...
All you Nokia fanboys who laughed at Steve Jobs when he unveiled the iPhone in that 2007 keynote, Who is laughing now?
It's over. Nokia can't compete and you know it.

Unregistered

You tard, this has nothing to do with the iPhone and well you know it. So Nokia sell 1m smartphones more than in the same quarter last year, but they can't compete; hmm, interesting logic. No doubt Apple would love to be selling upwards of 60 million phones a year, but that's probably never going to happen.

k.ewin

Do not worry about BUSTAFONE. He is a troll and he knows it. ;)

Unregistered

Heheh! Nice try at flaming...Jeez come on, sometimes it's like from some people's point of view that since Apple launched the iPhone all other phone manufacturers should shut up shop and go do something else...

I seem to recall that the 1st & 2nd gen iPhones dont capture video, the new iPod Nano captures video but no photos, the 3rd gen iPhone captures both video and photos and the iPod Touch does neither, Nokia and other manufacturer's devices have been able to do both for years already..

Check out some of the reviews of the N900 and then read the comments, iPhone doesn't look so hot anymore, OS X for mobile can't even play Adobe Flash content, what a joke...

k.ewin

Back on topic:
Nokia is in a transition phase. They did a lot to reinvent themselves (again) during the past two years (services focus, Maemo focus for high end, Symbian made open source, QT UI). This is quite a long term strategy and will need at least another year to come together (Maemo 6, QT everywhere, Symbian ^2,3,4, Services consolidation). Given that they have "road works" on all major paths they are doing quite well.

Unregistered

"Check out some of the reviews of the N900 and then read the comments, iPhone doesn't look so hot anymore, OS X for mobile can't even play Adobe Flash content, what a joke..."

The N900 CAN'T EVEN SEND MMS, WHAT A JOKE!

Massive loss of market share?
Yeah, a lack of innovation, resting on one�s laurels, assumption that the good time will never end, will do that.

http://www.mobilecrunch.com/2009/10/...hy-it-matters/

rvirga

Quote:

This reflects continued poor sales for the Nseries

Let me understand this: does Q3 mean July, August, and September, basically the time when the N97 and the N86 (Nokia's N-series and imaging flagships, respectively) went on sale? Bwahahahahahaha.
I mean, if the release of not one, but two flagship devices doesn't result in a (at least temporary) surge in sales, stick a fork in Nokia N-series, it's done.

k.ewin

The mobilecrunch article is plain wrong even in it's first sentence: "Nokia suffered an $834 million loss due to falling handset sales".

The loss is mainly because of a write down in the value of Nokia Siemens Network.

Unregistered

I wasnt aware the N900 cant do MMS, agreed thats a joke..

Wait a minute! Wasn't AT&T in US promising MMS for iPhone for SUMMER 2009?? Then someone filed a class action against them because summer turned into Fall ;)

Oh well I guess nobody's perfect.. Better got and charge your iPhone, the battery is running out again, shame you can just remove the cover and insert a spare one...

BUSTAFONE

Yeah anyone who dare s to tell the truth about your sinking ship is a troll.

After watching you euro types diss us Americans for being behind in cellphones and mobile tech in general, I am elated to see Nokia brought down by whom? APPLE and RIM, Thats right, AMERICAN manufacturers.

oniox

As much as most of us admire Nokia, we have to admit that they have been asleep at the switch for far too long. How on earth did they ever conspire to come out with buggy laden devices like the 5800 and N97. Who is in charge of QA, is anyone home at Nokia ?. Where is the attention to detail ? Why release buggy firmware expecting the user to accept the 'we will fix that in the next firmware update' joke. Ok how about synchronisation - I cant even Sync my podcasts. Nokia messaging is a buggy joke and Nokia Music is a waste of time.

Ok so Maemo will change all this (I hope so) . Even then, why ship it without MMS expecting users to toe the next firmware line. Bottom line, this is a confused company, very confused and the debacle that is Ovi store illustrates this perfectly.

You may not like Apple (I'm with you on that, their walled garden approach is horrible) but even the most dyed in the wool Nokian will have to admit that they've got the basics right with the iPhone and its obvious software quality is a priority there. They fully deserve their success and I wish them the very very best.

As for Nokia, thanks for giving me the 5800XM , million firmware updates later, I love it but dont forget, Innovate or die!!.

oniox

Quote:

Originally Posted by BUSTAFONE

hmm, but RIM is Canadian bro .

Mod note: Removed off-topic, discussion on US health care.

BUSTAFONE

Of course I know RIM is Canadian, genius.
And Canada is in AMERICA, and gets the latest harware at the same time and sometimes later than us.

Healthcare? We have the best in the world, thank you. We don't want your stinking Euro socialism imported to America.

Jaggz

It's pretty tricky to put a positive spin on these results. And the year-on-year drop tells quite a tale if you ask me, especially in North America.

What percentage of sales is being driven by Ovi, N-Gage, Maps, Music Store, etc.?

Some of these services have been around for quite some time now. How much value are they adding?

Unregistered

The fact of the matter is Nokia is facing stiff competition from both Asian and American manufacturers. Whats more challenging is there is not short term strategy in place to beat competition. Let me explain.

Flag Ships:

Have a look at the flagships from Apple, HTC and Palm. You just can't call N97 a better phone because it does "multitasking"..Hey, thats not a MUST HAVE feature. Its just something that Apple doesn't have so its become important for geeky comparison.

To be in the premium its not enough that you put in more flash memory, The early adopters need innovative software (aka eye candy).

Hardware:
And talking about hardware...Nokia probably can't source it...Thats why their phone with the snapdragon chip will come only in Feb 2010.

Emerging markets:
Here Nokia will only gain from Volume growth, But that means lower margins. Sadly, it wont be long for the Koreans and Taiwanese to penentriate the mindshare that Nokia has built over years.

What are left with Europe:
Execpt for the Nokia "Fan Boys" , Who are just old men, The actual younger generation has moved. They no longer find Nokia the innovative handset manufacturer it was (Last seen with N95)

There are some serious questions. Why Maemo, Does that mean symbian is no longer a "Smartphone OS", Why Maemo when Android is around.

Come'on U want to get capacitive multi touch in 2010 and compete with iPhone OS and Android. U should be kidding!!!!

Unregistered

I have to agree with at least part of the post that puts this down to the iPhone. Im not an Apple Fanboy, I didnt buy the original iPhone (it didnt impress me) but I was a Nokia user and I now own the iPhone 3Gs. While some may argue that the iPhone raised expectations for consumers others argue that this can not possible because Nokias phones had better camera/video recording/keyboard and more features before the iPhone was ever released. My view is that the iPhone did not raise expectations but it did change them. At the time when Apple was selling a cool and stylish smart(ish) phone that did what it did very well and was a direct replacement for many ipods, Nokia was selling the N96 as the flagship device. This turned in to a poor replacement for the brilliant N95. When Apple opened up the iPhone to direct downloading of apps, the best Nokia was offering was a download catalog folder that few people even new existed on their phones. When apple caught the attention of serious game developers, Nokia was still trying to make up its mind what to do with N-gage. I was a fan of the first Ngage and the concept behind the second offering but i still dont understand what they are doing with Ngage now. And while all this was going on google release Android, and Palm release the Pre. Nokia have made some great phones but they got lazy and lost their way. Hopefully this will be a wake up call and they will get back in the game.

oniox

Quote:

Originally Posted by BUSTAFONE

No Canada is in North AMERICA you muppet.

Mod note: Removed off-topic, discussion on US health care.

adi_pie

Quote:

Originally Posted by Unregistered

Okay, I've got a few things to tell you first, after which I'll comment on the article.
Firstly, "early adopters need innovative software (aka eye candy).", after reading that I can honestly say that either you're an idiot or have no idea what innovative means, eye candy means something that looks good, innovation has nothing to do with looks.
Secondly, "Execpt for the Nokia "Fan Boys" , Who are just old men, The actual younger generation has moved.", oh boy, where do I start? I'm not a fan boy, sorry for ruining your fantasy, oh, and I'm also 18, shocking I know. "The actual younger generation has moved", how you've decide that I have no idea, but how 'bout coming over to Romania and walking through two Universities and down the central Boulevard in Bucharest, I will make a wager that the Nokia's outnumber the Apple's by at least 10 to 1, though it'll probably be more.

On to the article, since I'm neither a journalist nor an economist, I won't have the nerve to say Nokia's in trouble, because those numbers look good to me especially because of the fact that they will soon launch a host of new devices, and because they made a profit, right? So, what's the problem?
One last thing, why do people get so angry when someone says something bad about a company? Even if the statement is correct. Come on man, it's just a damn company, not your mother. It's not like they pay you to attack the naysayers with the crusader-like fervor I've seen exhibited.
I'll try to keep it shorter next time.

adi_pie

Mod note: Removed off-topic, discussion on US health care politics.

Unregistered

2009 as been very bad year for Nokia an they do not seem to want to compete in the Top Class mobiles an seem more bothered about the cheaper price mobile,we thought they would release much better mobiles to show they are still the Best ,but we have not at all ,they did not want to compete with the Top Class Camera mobiles as Samsung an Ericsson were showing Nokia up,an then we get a Cheap idea from Nokia using the N85 body an put a 8 mega-pixel camera on it,an that was well below par from Nokia,an the N86 is not mobile that will attract alot of people as its not really out standing,Now we get the 12 mega=pixel camera mobiles but were are Nokia again letting its fans down an no sign of Nokia want to compete again,they better realise Nokia people will start buy other mobile instead of theres if they do not change there ideas or sales will drop down further

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