Nokia unfazed by market meltdown

January 24, 2008, 8:19 PM UTC

By Michal Lev-Ram

Looks like no one bothered to tell Nokia that there’s an economic downturn in progress. The Finnish phonemaker issued a strong fourth-quarter earnings report Thursday, announcing that profits rose 44 percent from a year ago to $2.66 billion while sales spiked 34 percent to $22.8 billion.

On a conference call with analyst Thursday morning, chief executive Olli-Pekka Kallasvuo called it an “impressive fourth quarter” and said that Nokia’s performance “seems at odds with the volatility we are all witnessing in the equity markets and financial sector.” Not that he’s complaining about that, of course.

The world’s largest phonemaker also announced that its global market share grew to an estimated 40 percent in the fourth quarter. The company shipped 133.5 million handsets in Q4, almost three times the number shipped by its closest rival, Samsung, as Nokia CFO Rick Simonson pointed out during today’s call with analysts. That’s an average of a mind-blowing 1.5 million phones a day — put in perspective, by the time you finish reading this article Nokia (NOK) will have shipped about 2,000 handsets.

Most of the growth is coming from developing countries like India and China, where millions of new wireless subscribers are buying their first cell phone each month. Nokia has been successful at hawking its low-cost devices in these countries. It recently unveiled two new handsets, the Nokia 2600 and Nokia 120, which feature exchangeable covers and are geared for emerging markets where many consumers share their handsets. In mature markets like Europe, its multimedia Nseries line sold over 11 million units this quarter. The high-end N95 (which retails for about $700 in the United States) has been Nokia’s “number one profit contributor,” said Kallasvuo, who added that almost six million phones have been sold since the gadget became available last year. Nokia is also hoping that its pending acquisition of digital mapmaker Navteq and Internet strategy will help provide new revenue opportunities in 2008 and help distinguish itself from competitors.

But not everything is rosy for the Finnish company. CFO Simonson acknowledged Nokia’s weak position in the United States, saying that the U.S. market accounts for a mere 5% of Nokia’s revenues. The company hasn’t always had the best relationships with U.S. carriers. For one, Nokia is dominant in GSM phones — the world standard — while the United States has been a CDMA-heavy market. To the carrier’s ire, Nokia’s also has tried pushing its own services and sells unlocked phones that will work on multiple carriers’ networks.

Nokia’s faces problems overseas too: Earlier this month it announced it would close down its Bochum, Germany, manufacturing plant, triggering a protest by some 15,000 people outside the gates. The backlash was so bad thatKallasvuo addressed the problem in Thursday’s call, explaining that labor costs in Germany are not “competitive enough,” but he said that the company will negotiate with the plant’s 2,300 employees to ensure a fair settlement

“The handset market is strong,” Kallasvuo told analysts.