Nokia has released their Q2 2009 results. Profits were down 66% year on year, but this was ahead of market expectations. Nokia cut its prediction for H2 2009 profitability and market share for 2009, which has driven down its share price. However the underlying results are encouraging, given the economic climate, although some concerns remain in the high end of the market. Converged devices sales (smartphone) were up at 16.9 million, compared with 15.3 million units in Q2 2008 and 13.7 million units in Q1 2009. The 5800 shipped 3.7 million units, while Eseries and Nseries shipments were 4.7 and 4.6 million respectively.

Olli-Pekka Kallasuvo, Nokia CEO, said:

"Nokia put in a solid performance in what was another tough quarter. We increased our share of the global mobile device market sequentially to an estimated 38% and grew our smartphone market share to an estimated 41%. As a result of strong operational execution, underlying operating margins improved sequentially in all segments. Competition remains intense, but demand in the overall mobile device market appears to be bottoming out. As before, we are continuing to tightly manage our operating expenses.

We are balancing short-term priorities with our longer-term growth ambitions as elements of the mobile handset, PC, internet and media industries converge to form a new industry. Consumers will increasingly expect devices and services designed as integrated solutions. To capture this opportunity we are accelerating our strategic transformation into a solutions company."
 

Ponts of interest

• Net profits were EUR 380 million, down from EUR 1.1 billion year on year (66%).
   
  
• Nokia mobile device volumes were 103.2 million units, down 15% year on year and up 11% sequentially. This is set against estimated industry volumes of of 268 million units, down 12% year on year and down 5% sequentially. Nokia's market share was estimated at 38%, up from 37% in Q1 2009 and down from 40% in Q2 2008. Nokia now expect its market share  to be flat for 2009 (previously had been estimated as up).
   
• Services and software net sales of EUR 140 million, but this cannot be compared to earlier results because of the sale of the security appliance business.
    
  
• Gross margins in devices and services was up sequentially at 34.0% (from 33.8%) and down from 36.1% year on year. The decrease year on year is mainly due to an proportional increase in the sales of lower cost / margin devices.
   
  
• Converged device shipments (smartphones) were 16.9 million, of which 4.6 million were Nseries and 4.7 million were Eseries. This is the first time that Eseries has outsold Nseries devices and perhaps suggests lacklustre sales of the N79, N85 and N96, compared to earlier Nseries devices. This further suggests that Nokia has concerns to address in the high end consumer market where it is facing fierce competition from Apple, HTC and Palm. Eseries performance continues to be encouraging.
  
  This means that 7.6 million smartphone shipments were numbered Nokia devices, with the 5800 representing just under half of these. To a certain extent, the 5800 may have cannibalised sales of the lower end Nseries products. Overall though, these impressive sales figures underline Nokia's move to push S60 into its mid tier devices.
     
  
• 3.7 million Nokia 5800's were shipped in Q2, taking total shipments to 6.8 million (sales started in December 2008). A total of 5 million Nokia E71s have now shipped since it started (shipping) in July 2008.
      
  
• Nokia's estimated industry converged mobile device volumes (smartphones) was 41.0 million, compared to 37.1 million in Q2 2008 and 36 million in Q1 2009. Therefore, Nokia's share of the converged device market was estimated at 41% in Q2 2009, the same as Q2 2008, but up from 39% in Q1 2009.
      
  
• Nokia's decline in market share year on year was primarily due to weaker sales in Latin America, North America and Asia Pacific, although this was offset, to some extent, by higher market share in China and EMEA. Sequentially, market share declined in North America, but increased in all other markets.

• Nokia Mobile Device Volume by Geographic Area:

  (million units)	Q2/2009	Q2/2008	YoY Change	Q1/2009	QoQ Change
  Europe	23.3	27.1	-14.0%	22.3	4.5%
  Middle East & Africa	18.9	21.1	-10.4%	14.8	27.&%
  Greater China	18.6	17.6	5.7%	17.9	3.9%
  Asia-Pacific	30.3	36.4	-16.8%	28.2	7.4%
  North America	3.2	4.5	-28.9%	3.4	-5.9%
  Latin America	8.9	15.3	-41.8%	6.6	34.8%
  Total	103.2	122	-15.4%	93.2	10.7%

• The average device selling price was EUR 62, down from EUR 65 in Q1 and 74 EUR year on year. Nokia says the continuing declines are due to general price pressure and a higher proportion of sales of lower priced products. The results do note that Q2 2009 benefited from the sales of new high end products compared to Q1.
   
  

Conference call notes

These notes are from Nokia's Q2 results conference call:

• OPK talked about how the mobile industry is under going the biggest change in its twenty year history and as a result Nokia is accelerating the pace of change towards a solutions mode of operation. This is the change that sees the convergence of mobile, Internet and media industries.
    
  Nokia regards a vibrant partner ecosystem (open approach) as very important to this future. OPK believes that Nokia open approach, working with partners, will help create a large sustainable ecosystem, which will drive mutual success for those involved. OPK used the Symbian Foundation, which was described as a cornerstone of Nokia's strategy, as an example of this, describing how Symbian and Qt would allow developers to build innovative application that leverage Nokia's Ovi service platform and allow Nokia to differentiate its products from its competitors. Further sharing these opportunities with developers and innovators will allow Nokia to move more quickly.
    
  
• Part of this move to a 'solutions mode of operation' (software and services) is an inherent commitment to build direct and continuous consumer relationships. As a result Nokia will measure the gaining and retaining of consumers as a key metric;  this will be measured as 'active users'.  Nokia aims to have 300 million active users by 2011. At the beginning of Q3 it has 46 million active users and is aiming / estimating 80 million active users by the end of the year.
    
  
• Nokia shipped 500,000 Nokia N97s in June 2009. The Nokia 5800 has now generated just under EUR 1.5 billion revenue for Nokia. It was, as with Q1, Nokia's best revenue generating product.
     
  
• Nokia Messaging now has 10 operator agreements (most recently America Movil), and there are ongoing discussion with many more. OPK said, 'we are just beginning to show our potential; the economics to operators are very compelling'.
    
  
• Nokia will continue to address all price points and segments. It aims to become a leading provider of integrated mobile solutions, which allows the user 'to make the most of every moment'. OPK noted that it will be a competitive space and the 'winners are yet to be determined'.
   

See also

Nokia Results

Earlier results: Q1 2009, Q4 2008, Q3 2008, and Q2 2008