Second-quarter net profit soared at Nokia thanks to a large one-time gain from the company's new telecommunications equipment manufacturing venture with Siemens.
Net profit increased 148% to €2.83 billion (US$3.8 billion as of June 30, the last day in the period reported), from €1.14 billion in the same period a year earlier, Nokia said Thursday.
The huge surge in profit was fueled by a €1.88 billion gain that Nokia booked from the launch of the new equipment venture, Nokia Siemens Networks.
Net sales increased 28% to €12.59 billion, from €9.81 billion in the year-earlier period. However, the company's results for the second quarter include those of the networking venture, making comparisons with last year's results misleading.
Despite the one-time gain from launching Nokia Siemens Networks, the new venture did not perform well. It reported a second-quarter operating loss of €1.3 billion on sales of €3.44 billion.
"Both net sales and margins were weak [at Nokia Siemens Networks], and these adverse developments require decisive action," Nokia said in a statement. It said it would accelerate cost-cutting efforts at the division and try to achieve the planned savings by the end of 2008 rather than by 2010.
Nokia shipped 100.8 million devices in the second quarter, up 11% from the previous quarter and 29% from the same period a year ago. The company estimated its global market share at 38%, up from 34% a year earlier.
Although Nokia was able to increase its handset sales, particularly in the high-growth Asia-Pacific region, its average selling price in the second quarter fell to €90, from €102 in the same period a year earlier. The company attributed the lower average price to the significantly higher number of low-cost entry devices it sold.
At constant currency rates, overall revenue would have increased 32% compared with the same period a year earlier, Nokia said. It provides the measure to show how it would have performed if not affected by changes in exchanges rates.
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