Nokia, the world’s biggest mobile phone maker, reported mostly in-line Q2 results this morning and brightened its industry forecast. Shares should trade up today; they’re already up 8.2% in pre-market trading to $27.19.
The good news: Nokia (NOK) now expects the mobile phone industry to grow by 10% “or more” this year from the 1.14 billion units shipped last year; this is better than the “10%” forecast it had been giving most of the year — and a welcomed sign of improvement after many of Nokia’s rivals have recently offered gloomy forecasts. Nokia also “continues to target an increase” in mobile phone market share this year, but expects it to be flat q/q in Q3, around 40%.
“Looking at the rest of the year, we are optimistic and have had good feedback about the broad range of new products we expect to sell in our device business,” CEO Olli-Pekka Kallasvuo said in a statement.
The bad news: Nokia is about to get some real, scary competition in the high-profit smartphone market from Apple’s (AAPL) new iPhone 3G, and new 3G BlackBerries from Research In Motion (RIMM). Nokia, of course, is aware of this — on the company’s call, it mentioned plans to include touchscreen gadgets in many of its product lines, from high-end smartphones to even low-end phones. However, we still don’t know if any of their new smartphones will be — as AmTech’s Mark McKechnie says — a “credible” reponse to Apple and RIM.
Revenue: €13.2 billion, up 4.5% y/y, vs. €12.8 billion consensus
EPS: €0.36, in line with Street (per AmTech) but a penny shy of Reuters’ consensus €0.37
mobile phone Shipments: 122 million, beating Street at 120 million
Average Sales Price: €74, missing Street at €76.3, “approximately 40% of the decline was caused by the impact of exchange rate movements.”
LIVE Conference Call Notes:
8:02 Call begins. Standard disclaimers.
8:05 Happy about device and service operating margin.
8:07 Share up except in Latin America and China. Good share gains in Europe. Device volume up 80% sequentially in the U.S., a “lot more work to do” before satisfied there. Lost a bit of share of smartphones in Q2, but not a big surprise given lack of new smartphones. Portfolio “will inprove.” Already announced 10 new smartphones that will sell in the second half, plus “several more” to announce.
8:10 Announced 21 new products in Q2 alone, covering low-mid-high-end, and more announcements to come. A few highlights: E71, which started to sell at the end of June.
8:13 N96, which it hopes to start selling this quarter. Video/mobile TV, thinner than N95, more memory, up to 5 hours video playback, 14 hours of music playback, 4 hours of TV playback. Expect it will do well.
8:16 Committed to a full product lineup of touchscreen devices, from high-end to mid- and low-end. First touch device aimed at “volume” part of market, our in 2nd half.
8:20 4.5 million GPS devices in Q2, bundling navigation service with half. Good for services business.
8:21 Nokia Siemens Networks making progress in a challenging market. During quarter, one can see synergy benefits. Still more needs to be done. Gross margin has been notching up, reflecting cost synergies, etc. Market remained “difficult.” Competition remains tough.
8:23 Going through financials from press release.
8:24 Lower margins in Q2 were expected due to focus on cheaper products, etc.
8:35 Where do you see margins going? “Almost like putting words in my mouth!” GM stuff comes up quite often: We don’t try to maximise GMs. We try to maximise the bottom line, take market share in a way that’s sustainable. We said 20 +/- at the beginning of the year. I think we’ll continue here.
8:38 Will continue to see low end grow, which means cheaper ASPs. But we can make profits there.
8:41 China and emerging markets: Looking at overall market in China, obviously a lot of events going on there now. What’s your view on overall market? Has any of the weakness in the overall Chinese markets showed signs in India or other emerging markets? Looking at loss of market share in China, where we went from 20% to 40% — has been very good progress. Totally seasonal fluctuation can happen. A lot from China Mobile super-low-end deal that we decided not to participate in.
8:45 Overall China continues to be solid. Some impact from earthquake. But China is a huge, huge market. The severity or significance of that exaggerated. Can’t really extrapolate other markets from China. Best period ever in June in India.
8:46 Why more confident about overall market? With everything factored in, we feel good about 10% “or more.” Higher unit growth in emerging markets, nothing really new, just better visibility.
8:48 More marketing spend in Q3, of course.
8:57 Smartphone market isn’t Europe only stronghold. Only about 20% of volumes in W. Europe. Globally important in smartphones.
8:59 What about the U.S.? Positive momentum for second half? First CDMA product approved by Verizon, confidence in CDMA strategy, which is an essential part of share gains going forward.
9:01 Charges in quarter… did you break out? Yes we did. With Navteq, any change of fundamentals relative to their forecast? How will that be layered in? As we’ve said, will be a reportable segment. Devices and services, Nokia Siemens Networks, Navteq.
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