Nokia profits up 65 per cent on strong smartphone sales

Much of Nokia's profitability has come from cost cuts

Nokia has reported strong fourth-quarter results, logging a 65 per cent increase in profit and gaining 40 per cent of the smartphone market.

The Finnish company shipped 126.9 million handsets in the quarter, a rise of 12 per cent on the same period a year ago. However, overall sales dropped by over five per cent.

Nokia increased its mobile phone market share by two points to 39 per cent, and its share of the smartphone market by five points to 40 per cent.

"I said on the last earnings call that Q4 would be the best quarter of the year in terms of devices and services net sales, volumes and margins. It was that and more," said Nokia chief executive Olli-Pekka Kallasvuo at today's earnings call.

"The demand environment for mobile handsets ended up better than we anticipated, and we took advantage of this upside."

Much of Nokia's profitability, however, has come from cost savings. Research and development spending fell nine per cent, while sales and marketing costs were cut by nearly a fifth. The company has cut 2,000 jobs, or 1.8 per cent of its work force.

Nokia's biggest geographic weakness is North America, where it holds just 3.8 per cent of the market. But having a third of the European and Asia-Pacific markets, and nearly 20 per cent of the Chinese market, has offset low demand in the US.

In other financial news, Motorola has gone into the black for the first time in four years, posting a profit of $142m (£88m) compared to a loss of $3.6bn (£2.2bn) this time last year. Overall sales were down 20 per cent, leaving the company with less than four per cent of the mobile phone market.

Motorola's handset division still made a small loss of $132m (£81m), but the company is banking on the launch of 20 new Android phones this year, four in the first quarter.

"We look forward to broadening our handset portfolio in 2010 with the launch of at least 20 smartphone devices around the world, and continued evolution of our Motoblur service," said Sanjay Jha, Motorola co-chief executive and chief executive of Motorola Mobile Devices.

"With an aggressive product and brand strategy and our continued focus on operational efficiency, we are building on our momentum to further improve the financial performance of the Mobile Devices business."