Nokia's market share falls below 30 percent

Nokia Corp. reported better than expected first-quarter profits Thursday but its global market dropped to below 30 percent for the first time in over a decade as the world's top cellphone maker continued to lose ground to rivals.

The Finnish company's net profit in January through March fell euro5 million to euro344 million ($499 million) from a year earlier. Revenue grew 9 percent to euro10.40 billion, Nokia said Thursday.

Markets had anticipated a greater fall in profits and lower sales, so the results were a pleasant surprise, pushing Nokia's share price up more than 2 percent to euro6.07 ($8.81) in Helsinki.

Nokia has faced increasing competition over the last few years, particularly from so-called smartphones.

Though its smartphone sales were up 6 percent at euro7 billion in the first quarter, the company showed further signs of suffering against stiff competition from Apple Inc.'s iPhone, Android-based smartphones and Research in Motion's Blackberry.

Nokia said it sold 24 million smartphones, 13 percent more than in the same period in 2010, but its market share for the devices plunged to 24 percent from 39 percent a year earlier, according to Strategy Analytics.

The Finnish company said its overall global market share also fell - to 29 percent, from 33 percent a year earlier and 31 percent in the previous quarter. Nokia hasn't seen such low market share levels since the late 1990s.

The average selling price of Nokia handsets was up at euro65 from euro62 a year earlier, indicating the company is selling more high-end cellphones.

Nokia sold 108.5 million devices in the first quarter, above the Strategy Analytics estimate of 105 million.

"Volumes were better than expected and pricing was stronger," said Neil Mawston, an analyst at Strategy Analytics . "But it's clear that competition is still tough."

Mawston said Nokia can expect "bumpy revenues and profits for the next couple of quarters," as its recently-announced link-up with Microsoft Corp. comes onstream.

CEO Stephen Elop said Nokia has now signed a "definitive" deal with Microsoft Corp. to develop software for smartphones "and that product design and engineering work was "well under way."

The partnership, first announced in February, will make Windows Phone software the main platform used in the Finnish company's smartphones.

"In recognition of the unique nature of Nokia's agreement with Microsoft and the contributions that Nokia is providing, Nokia will receive payments measured in the billions of dollars," Nokia said.

Elop did not say when the Nokia Windows phone would be launched, but added that "devices that take advantage of the Windows phone platform will be shipping in volumes in 2012."

Describing the first quarter as "remarkable," he said the company will face "a more challenging second quarter," as it goes through a restructuring period with Microsoft.

Nokia said the tsunami and earthquake in Japan had disrupted the supply of some components linked to Japanese suppliers and would impact its results in the second quarter.

Facing fierce competition, Nokia has lost its position as the industry's innovative leader and the company's stock dipped to a 13-year low of euro5.60 in March.