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Nokia wins praise for quarterly results

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David Meyer ZDNet.co.uk

Published: 25 Jan 2008 13:41 GMT

Analysts have heaped praise on Nokia for its "great" results in the fourth quarter of 2007.

Released on Thursday, the results show handset shipments of 133.5 million, up 27 percent year-on-year. The average sale price for a Nokia handset rose slightly, and total revenues for the quarter were €15.7bn (£11.6bn) — a 34 percent year-on-year rise. Profitability was also up, with the operating margin for the quarter at 15.9 percent, up on the 13 percent margin in the fourth quarter of 2006.

Nokia's enterprise division saw a particularly strong rise in quarterly sales of 120 percent, to €670m. However, that division only broke even at the end of the second quarter of 2007, and a Gartner analyst told ZDNet.co.uk on Friday that year-on-year comparisons were risky in this case.

"When you compare that to last year, that was still the beginning for them for enterprise," said Gartner's research vice president for mobile handsets, Carolina Milanesi. "You need to bear in mind how [small the enterprise division] was last year."

According to both Milanesi and Ovum's Martin Garner, the E65 handset was central to this growth in the enterprise sector. "The E65 was its star, although the E51 and E90 Communicator also did well," wrote Garner on Ovum's website on Thursday. "The rise in the average sale price of devices across these divisions is down to a change in the mix for the fourth quarter, favouring mid- and high-end products. More importantly, Nokia's average operating profit per phone rose from €15 a year ago to €19.70."

Garner also pointed out that Nokia was "now as big as Samsung, Motorola, Sony Ericsson and LG added together".

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"These numbers were delivered in spite of some component shortages, a drop in Nokia's shipments in the US and a slight loss of market share in China," Garner wrote. "Also inventory levels going into 2008 are lower than they were a year ago, so the extra volumes have not just been filling up the channels. It's hard to see any other vendor getting close to this level for a long time."

Calling the fourth quarter "a great quarter for them again", Milanesi noted that Nokia had "even managed to improve margins over the third quarter, when sales were strong".

"They have benefited from the weakness of Motorola, [which] de-emphasised [its] focus [on] the ultra-low-cost segment of the market," said Milanesi. Motorola's results, released on Wednesday, were generally acknowledged as dismal.

"At the end of the day, Nokia [is] doing everything right and the only problem they remain with is North America," said Milanesi. "They need to solve that if they want to grow market share in 2008".

In his analysis for Ovum, Garner also suggested that a challenge for Nokia would be "building share in the US without getting burnt if there is a recession".