Nokia's first quarter left a lot to be desired, but there is good news: The company sees a bottom in handset demand. However, if it really wants to come out of the downturn swinging it needs to make a splash in the U.S. Just a respectable showing in the U.S. would boost Nokia's financial prospects.
First the numbers (Techmeme, earnings release, PDF) Nokia reported first quarter operating profit of 55 million euro, down from 1.5 billion euro a year ago. Revenue fell 27 percent in the first quarter to 9.3 billion euro. That said, Nokia CEO Olli-Pekka Kallasvuo pulled an Intel and called a bottom.
Kallasvuo said the first quarter was about clearing the decks.
Regarding the health of the overall mobile device market, the inventory already in the sales channels decreased substantially during Q1 due to extensive destocking by operators and distributors. This adversely impacted our sales volumes in the quarter. However, it has also resulted in the demand picture becoming more predictable as we enter the second quarter.
Wall Street loves predictable and Nokia shares gained in U.S. trading. Here's a look at the 5-day chart:
More importantly Nokia (all reviews) expects second quarter mobile device volume to remain on par with the first quarter. Nokia expects its market share to tick up from the 37 percent posted in the first quarter. Nokia also said that device demand will improve in the second half. For the year, Nokia says industry device volume will be down 10 percent in 2009 from 2008.
Bottom line: Nokia's outlook isn't rosy, but the "falling off a cliff feeling" is easing.
The larger question is what will get Nokia growing at a rapid clip. Simply put, Nokia needs an invasion of the United States. Nokia has a miniscule base in the U.S.
Check this chart out:
Two things jump out immediately. First, Nokia is exposed to the global downturn more than most technology companies. And second Nokia's emerging market is North America with first quarter growth of 30.8 percent off of a small base. Nevertheless, Nokia has a growth blueprint sitting right in front of it.
Become a player in the U.S. and you buffer a lot of the economic body blows Nokia is taking.
Nokia seems to have received the message with a few notable launches in the U.S., but these numbers indicate that the company needs to step it up.