Nokia beats esimates; Growth forecast is raised

"With half a year visibility, we're able to say growth will be 10 percent or more," Nokia's Chief Financial Officer Rick Simonson said in an interview, higher than the Espoo, Finland-based company's previous forecast of 10 percent.

Simonson said Nokia expects the mobile phone industry to weather any global economic slowdown because the devices have become such a part of people's lives.

Nokia's share price had plunged about 40 percent this year amid concerns the mobile phone industry would suffer as the credit crunch and inflation take their toll on economic growth and consumers' spending power. However, Simonson said demand for cell phones will remain high even as consumers face tough choices on how to spend their income.

"One of the highest priorities is to use their usable income to insure that they have communications," Simonson said in a phone interview. Nokia, he added, has "an ability to play all markets. Some markets are growing strongly, some not so strongly but we aren't trapped to one market only."

Nokia's profit was $1.75 billion, or 46 cents per share, down from $4.49 billion, or $1.14 per share, a year earlier.

Sales rose 4 percent to $20.87 billion.

The 2007 second-quarter result included a $2.98 billion gain from the formation of Nokia Siemens Networks, a joint venture with Germany's Siemens AG.

Excluding special items, Nokia said its profit rose 8 percent to $2.18 billion.

Analysts expected earnings of 56 cents per share on $20.05 billion in revenue, on average, according to Thomson Financial.

The results boosted Nokia's battered stock, with shares closing up 7.9 percent at 17 euros ($26.94) in Helsinki.

"Nokia's profitability was a nice surprise," Glitnir Bank analyst Michael Schroeder said, adding profit margins in both the cell phone and the network divisions were higher than expected.

The Finnish company said its share of the global market for handsets grew to 40 percent, from 38 percent in the second quarter of 2007.

"Looking at the rest of the year, we are optimistic and have had good feedback about the broad range of new products we expect to sell in our device business," Nokia Chief Executive Olli-Pekka Kallasvuo said in a statement.

However, the closely watched average selling price of Nokia phones continued to fall because of higher volumes of cheaper phones sold in emerging markets and a negative impact of the weak dollar, Nokia said.

The average price for a Nokia handset was $117, down from $125 in the first quarter of the year and $143 in the second quarter of 2007.

In terms of volume, company saw the biggest sales growth in Asia, Latin America, the Middle East and Africa. Sales of Nokia phones were up 10 percent in North America and flat in Europe.

Nokia's products range from no-frills cell phones that are selling in high volumes in emerging markets to more pricey smartphones equipped with GPS navigation and music players.

Simonson said more than half of the 122 million Nokia handsets sold in the quarter were low-end phones with an average selling price of $80 or less.

"We do have a lot of low-end products because we make profit there," Simonson said. "Other competitors don't have low-end. If they do, they don't make profit there."

Nokia's closest competitors in the mobile phone industry include Samsung Electronics Co. of South Korea, U.S.-based Motorola Inc. and Sony Ericsson, a joint venture between Japan's Sony Corp. and Sweden's LM Ericsson.

Nokia also faces competition in the premium handset market from Apple Inc., which has already sold more than 1 million of the new iPhone model introduced on Friday.