Nokia Posts Surprise Rise in Quarterly Profits

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Having named its new CEO Nokia has also posted another quarterly decline in revenues although profits were up by 10 percent.

The company posted revenues of EUR2.66 billion, which was down by 15% against a year ago. At constant currency Nokia's continuing operations net sales would have decreased 11% year-on-year.

The year-on-year decrease in Nokia's continuing operations net sales in the first quarter 2014 was primarily due to lower net sales in Networks and, to a lesser extent, lower net sales in the maps division, Here. This was partially offset by a slight increase in net sales in Technologies. The decrease in Networks' net sales in the first quarter 2014 was primarily driven by lower net sales in Global Services and the divestments of businesses not consistent with its strategic focus, as well as the exiting of certain customer contracts and countries.

Operating profits rose by an unexpected 10% to EUR216 million (US$299 million). The profits came in significantly higher than analyst expectations which had averaged around the EUR143 million mark.

The underlying operating profitability for Nokia's continuing operations increased to EUR 304 million, or 11.4% of net sales, compared to EUR 254 million, or 8.1% of net sales a year ago.

At the end of the first quarter 2014, Nokia's continuing operations in Finland had approximately EUR 2.4 billion of net deferred tax assets that have not been recognized in the financial statements. A significant portion of Nokia's Finnish deferred tax assets are indefinite in nature and available to be set against future Finnish taxable income.

Nokia Networks

A year-on-year decrease of 17% in Networks net sales in the first quarter 2014 was partially due to divestments of businesses not consistent with its strategic focus, as well as the exiting of certain customer contracts and countries. Excluding these two factors, Networks net sales in the first quarter 2014 declined year-on-year by approximately 10% primarily due to lower net sales in Global Services. Mobile Broadband net sales increased slightly year-on-year.

On a regional basis compared to the first quarter of 2013, net sales in North America declined 38% primarily due to a cyclical slow-down in LTE roll-outs; in Middle East and Africa, net sales declined 30% primarily due to the focus on a specific set of countries, in Latin America net sales declined by 28% primarily due to constrained operator spending and the exit of certain projects in line with Networks' strategy; in Europe net sales declined by 14%, primarily due to contract exits in line with Networks' strategy and operator spending that, on balance, was constrained; in Asia Pacific, net sales declined 12% primarily due to a decline from the height of the LTE network roll-outs in the first quarter of 2013 in Korea and net sales in Greater China increased 25% primarily due to the new TD-LTE network roll-outs.

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