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The world's largest handset maker, Nokia Corp., is expected on Thursday to show continuing growth in quarterly profits and a pickup in sales, as the mobile phone industry emerges from a debilitating global economic crisis.
OVERVIEW: Like its main rivals, Nokia was hit by the financial downturn after a major setback in the last quarter of 2008. Last year, it slashed more than 3,000 jobs globally and temporarily laid off thousands in Finland. Its joint network equipment venture with Germany's Siemens AG -- Nokia Siemens Networks -- announced 5,700 job cuts. It has warned of more layoffs this year.
But, in the first signs that the industry was slowly recuperating, the bellwether surprised markets two months ago when it reported a surge in smart phone sales and a 65 percent growth in fourth-quarter net profit despite a fall in revenue.
BY THE NUMBERS: Sixteen analysts surveyed by Dow Jones Newswires predict that Nokia will report 6 percent growth in Q1 net sales and a nine-fold increase in operating profit from a year earlier when its net profit plunged 90 percent and sales fell 27 percent in the middle of the recession.
WHAT'S AHEAD: Last year, Nokia held onto its position as the No.1 mobile phone maker, selling 432 million handsets -- down 8 percent on 2008. Total industry sales were 1.1 billion, down 6 percent on the previous year.
The company predicts that device volumes will grow some 10 percent this year globally, but that growth in its own market share -- at some 34 percent -- will remain unchanged.
Markets will be looking for further growth signs after a difficult 2009, which Nokia's Chief Executive Olli-Pekka Kallasvuo described as "the toughest environment ever" in the sector. Analysts have predicted that Nokia's latest handsets -- cheaper smart phones aimed at emerging markets -- will help the Finland-based company retain market share and show even greater growth during the second half of the year.
Despite strong competition from Blackberry and iPhone, Nokia's market share in smart phones grew from 35 percent to 40 percent in the last quarter of 2009. That growth could show signs of having continued in Q1.
Nokia has been the top handset maker since 1998 and has gradually expanded to include online services, such as downloads of music, games, maps and the fast transfer of photos and video in a global online market it estimates will reach euro100 billion by 2010 with 300 million active users of its services.
Earlier this year, Nokia began providing free navigation services for users of its smart phones and hopes to double the number of GPS navigation users to 50 million worldwide, giving it an added edge over rivals.
ANALYST TAKE: Strategy Analytics predicts that Nokia's handset sales will grow 10 percent in the first quarter compared to the same period in 2009. "I think we'll see a fairly healthy pattern emerging. A 10 percent growth in volumes and slightly stronger margins as well, probably of some 13-15 percent," the London-based market research firm's analyst Neil Mawston said.
STOCK PERFORMANCE: Nokia's share price, which jumped 10 percent to euro10 after the previous quarter's better-than-expected result, has since continued on an upward curve. Despite dipping briefly to euro9.40 in February it has been over euro11 for weeks, closing on Monday at euro11.20. Nokia's shares were up 2 percent at euro11.43 ($15.35) in early afternoon trading Tuesday on the Helsinki Stock Exchange.
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