HELSINKI: Mobile phone maker Nokia's position as world number one looked increasingly threatened on Thursday as its market share shrank further despite better-than-expected quarterly results.
The company's first quarter net profit fell 1.4 percent to 344 million euros ($503 million) beating expectations of analysts polled by Dow Jones Newswires for 279 million euros.
Nokia said sales were up 9.1 percent to 10.4 billion euros.
Thursday marked Nokia's first quarterly results since new chief executive Steven Elop said in February that the company, losing ground in the vital smartphone market to iPhone, Blackberry and Google, would abandon its own mobile operating system and start using one designed by Microsoft instead.
"In the first quarter, we shifted from defining our strategy to executing our strategy," Elop said in an earnings statement, adding: "I am pleased to report that we signed our definitive agreement with Microsoft."
Following the announcement, Nokia initially saw its stock price soar more than three percent but less than an hour before closing, it was trading down
0.42 percent on a Helsinki market down 0.13 percent.
The former undisputed world number one saw its market share fall to 29 percent from 33 percent in the first quarter of 2010 and compared with 40 percent in the first half of 2008.
US-based Strategy Analytics calculated Thursday that while Nokia remains the world leader in terms of devices sold, it has slipped behind Apple in wholesale device revenue at 9.4 billion dollars compared to Apple's 11.9 billion.
Pohjola Bank analyst Hannu Rauhala stressed that market share was the key issue.
"The first quarter is impacted by the same things that caused their market
to fall last year, like the Symbian smartphones losing market share," he told AFP.
Nokia's radical decision to dump Symbian is not expected to bear fruit for at least another year while the transition period is forecast to be so difficult that both rating agencies Moody's and Standard and Poor's recently downgraded the company's debt and credit ratings in response.
"Market share will come down in every quarter this year because the competitiveness gap between Nokia and its competitors will continue to grow," said FIM bank analyst Michael Schroeder.
Elop said that phones using Microsoft would be "shipping in volumes in
2012."
Nokia said it expected mobile phone revenues to fall from the first quarter's 7.1 billion euros to 6.1-6.6 billion in the next two quarters, followed by a fourth quarter that will only be "seasonally higher."
Part of the coming slump, said Schroeder, was because Nokia's current portfolio of Symbian products, while improving a bit, was falling rapidly behind as rivals develop "at an incredible rate."
Elop said in a conference call that the company saw "no immediate evidence of a change in consumer perception" toward its Symbian products but Schroeder felt it was too early to tell.
Other challenges for the next year include a shortage of components due to the earthquake in Japan, Nokia said.
Thursday's announcement gave no details on the number of job cuts which are expected to follow the phase-out of Symbian, with speculation ranging up to
6,000 lost jobs, with hundreds or thousands more to go among subcontractors.
"Generally, all employees can stay on the payroll through the end of the year," Elop said during the conference call, noting that layoff talks with employees begin next week.
Employee union representatives welcomed the announcement, saying it was far better than the uncertainty they had been living with.
"This kind of news allows employees to concentrate more on their work, knowing they're not being rushed out the door," said Kalle Kiili, shop steward in the southern town of Salo, the heart of Symbian development in Finland.
Shop stewards at other centres in Salo, Espoo and Oulu told AFP they expected exact job cut numbers to emerge once next week's discussions begin.
At the end of the first quarter, Nokia employed just 131,000 people worldwide, with thousands in Finland hired as Symbian developers.
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