Nokia profits drop following price cuts

15 Oct 2004

The world’s largest mobile phone manufacturer, Nokia of Finland, has seen a sharp fall in its third-quarter profits while revenues remained stagnant. The company has been cutting the price of some models in an effort to win back market share, and though the move has worked, with Nokia’s share of the handset market rising from 31% to 33% in the three months to the end of September, it has impacted pre-tax profits, which were down 18% to EUR1 billion. The company saw sales of EUR6.94 billion, up just 1% on the same period last year.

At one time Nokia was close to capturing a 40% share of the mobile phone market, but it was slow to pick up on the trend for clamshell and camera-enabled phones and has been losing ground to its competitors. Rival manufacturer SonyEricsson, which yesterday reported a 249% leap in pre-tax profits to EUR136 million, says more than 60% of its handset shipments are now cameraphones; Nokia says that just 25% of the 51.4 million phones it shipped during the quarter were fitted with cameras. The Finnish company says the handset price cuts will also impact fourth-quarter earnings, which it forecasts will be below last year’s levels, although it says handset sales will remain buoyant.