Nokia Q1 2011 results - beats expectations, tough quarters ahead

Nokia has released its Q1 2011 results, reporting an operating profit of €439 million (down 10% Year-on-Year), with net sales of €10.399 billion (up 9% YoY). Nokia's device and service division's profits were €439 million, down 10% from last year. Margins in devices and services were 9.8% (down 2.3% YoY and down 1.5% QoQ).

Total converged devices sales (mainly Symbian-powered smartphones) were 24.2 million, compared with 21.5 million units in Q1 2010 (up 13% YoY) and compared with 28.3 million units in Q4 2010 (down 14%, QoQ). Worldwide smartphone market share was 26%, down 5% sequentially and 15% year on year. Read on for more analysis and more details.

The financial results beat market expectations - an average of estimates from 29 analysts had device margins at 8.5% versus the announced 9.8% with similar figures for net income and total sales. Consequently Nokia's share price is slightly up this morning (3% at the time of writing). Nokia lowered its forecasts for Q2 and Q3 2011, suggesting that it faces a tough year ahead, but also announced that it has signed a definitive agreement with Microsoft.

Stephen Elop said:

“In the first quarter, we shifted from defining our strategy to executing our strategy. On this front, I am pleased to report that we signed our definitive agreement with Microsoft and already our product design and engineering work is well under way.

Following a solid first quarter, we expect a more challenging second quarter. However, we are encouraged by our roadmap of mobile phones and Symbian smartphones, which we will ship through the balance of the year. We are fully focused on delivering the needed accountability, speed and results to positively drive our future financial performance.”

In terms of smartphones, both sales and market share were down, largely in line with expectations, given the competitive market conditions. The smartphone sales show the first major sequential fall since 2008 (although part of this is attributable to the very strong seasonal sales in Q4, 2010), reflecting the challenges that Nokia faces with the competitiveness of Symbian, especially at the higher end of the market.

The smartphone sales figures are unlikely to have been significantly impacted by Nokia's strategy change, which came half way through the quarter. Nokia remains the single biggest smartphone manufacturer by some distance, but will have to work hard to maintain that position through the transition to Windows Phone. 

Looking forward, Nokia now expects a tough 2011; in Q2 it is expecting its Devices and Services margin to be between 6% and 9% and devices and services net sales of between 6.1 and 6.6 billion Euros. A similar forecast is expected for Q3 2011. This forecast is lower than previous expectations. 

Nokia converged device shipments


Market context

This chart illustrates the market context in terms of sales of smartphones over the last three years:

Smartphone shipments

 

Points of interest

Notes from the earning conference call

See also

Nokia Results

Earlier results: Q4 2010Q3 2010Q2 2010Q1 2010Q4 2009Q3 2009Q2 2009Q1 2009Q4 2008Q3 2008, and Q2 2008

Published by Rafe Blandford at 10:58 UTC, April 21st

Section: News
Categories: Industry, Editorial Thoughts
Platforms: General, S60 5th Edition, General, Symbian^3