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Global slowdown turns Nokia to emerging markets

First-quarter earnings fail to reach expectations amid global slowdown

Nokia said a slowdown in the global handset market caused it to miss its earnings expectations in the first quarter.

The handset manufacturer said the market will shrink in euro terms this year for the first time, a forecast that quickly led to a 14% plunge in its share price. The vendor said a weakening dollar and difficult economic conditions in the US and Europe would negatively affect worldwide handset sales.

Nokia reported a rise in net profit to €1.22 billion ($1.94 billion) for Q1 2008, up 25% from the same period a year ago, but falling short of the $2.3 billion expectations. Sales rose 28% to €12.6 billion ($20.1 billion).

Chief executive Olli Pekka Kallasvuo said the rise of raw material and labour costs would not impact on demand. Nokia still expects to achieve a 10% growth in handset sales this year, but declines in the averaging selling price (ASP) of handsets is leading to a dip in revenues. Mobile phone vendors will increasingly have to focus on making low-end devices to cater to the booming emerging markets.

"The overall device market developed as expected [in the first quarter], with the greatest demand in emerging markets, where our position is very strong," said Kallasvuo.

"The competitiveness of our product portfolio is reflected in our market share and we target market share gains in the second quarter. The portfolio is renewed on a continuous basis. While we will not have major new products shipping in the second quarter, we expect a number of new products to be shipping, and to have a positive impact on our results, in the second half of 2008," he added.

Nokia shipped over 115.5 million handsets in the three months to March 31, 2008. The largest market by shipments was Asia-Pacific, with 34.1 million units shipped, up 43.9% year-on-year. Other emerging markets showed a high level of growth; Nokia shipped 20.2 million units to Middle East & Africa, and 21.0 million units to China in the period - up 28.7% and 33.8% respectively year-on-year.

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