October 19, 2006, 9:40 AM — Nokia Corp. reported a 20 percent jump in net sales for its third quarter, but increased sales of entry-level phones caused a sharp drop in average selling prices and reduced the company's profit.
Net sales for the quarter were €10.1 billion (US$12.8 billion as of Sept. 30, the last day of the period reported), up 20 percent from €8.4 billion in the same quarter a year earlier. Net profit was €845 million, down 4 percent from €881 million a year earlier, Nokia said Thursday.
The company sold 88.5 million devices in the quarter, up 33 percent from the same quarter a year earlier. That helped to boost Nokia's share of the market to 36 percent of all devices sold, from 34 percent in the second quarter of this year, it said.
The average selling price of its phones dropped sharply, however, to €93, down from €102 in the second quarter, continuing a trend from the past several quarters. The lower prices were due to "a significantly higher proportion of entry-level device sales," the company said.
Average selling prices are dropping in part due to the quick growth of emerging markets. As mobile use expands quickly in countries like India and China, those markets represent a double-edged sword for phone makers: They can sell more devices there, but they have to sell them at prices people can afford, which can eat into profits.
Operating profit from Nokia's mobile phone group dropped 11 percent to €779 million, even though net sales from the group climbed 14 percent to €5.9 billion. The profits dropped partly because of restructuring charges for its CDMA business, Nokia said.
The company's enterprise solutions group, which sells its Eseries devices, reported an operating loss of €65 million, compared to a loss of €37 million a year earlier. The increased loss was due primarily to increased marketing spending, the company said.
The company's multimedia division, which sells its Nseries devices, performed far better. Net sales climbed 45 percent to €2.1 billion, and the group's operating profit grew 49 percent to €366 million.
Despite the fall in net income, diluted earnings per share at the phone maker increased to €0.21, up 5 percent from the same quarter a year earlier.