In the year 2009, Nokia’s net sales decreased by 19% from EUR 50,710 million to EUR 40, 984 million (Nokia, “Nokia Group 2005-2009, IFRS” 64). Operating profits reduced by 76% from EUR 4,966 million to EUR 1197 million. The company’s profit before tax was reduced drastically by 81%. In the same year, Europe led in the sales percentage, accounting for 37% of the total sales. It was followed by Asia-Pacific while China came in at a third place. North America was last accounting for only 4% of the company’s sales. China remains the best market for Nokia leading in the list of markets in which Nokia generated the greatest net sales. The country was still at the top of the list in 2008 while India held the second position in both 2008 and 2009 results.
The company’s gross margin was 32.4%, a decrease from 2008 which registered a gross margin of 34.3% (Nokia corporation and subsidiaries 10). The operating margin was on a downward trend as it dropped from 9.8% to 2.9 %. Its devices and services operating profit shed off 43% from EUR 5,816 million in 2008 to EUR 3,314 million (Nokia, “Financial results review by board or directors” 3). The company’s operating cash flow was EUR 3,247 million, a rise from EUR 3,197 million in 2008. This is perhaps from a strengthened portfolio of mobile phones and other products with new models in the market during the period.
Several aspects of the financial results remained the same such as the company’s expenditure on research. Its costs represented 14.4% of the company’s net sales up from 11.8% in the previous year (Nokia, “Nokia in 2009” 2). At the end of the year 2009, the company employed over 37,000 people in their research and development projects in 16 different countries. As a result of constrained finances, the company tried to reduce some of its expenses. Selling and marketing expenses were reduced from EUR 4,380 in 2008 to EUR 3,933 million. Its administrative expenses were also reduced from EUR 1,145 million to EUR 1,284 million in 2008. Group function expenses went down to less than half the figure in 2008, from EUR 396 million to EUR 134 million (Nokia, “Consolidated financial statements” 21).
The company’s numbers downward trend was largely attributed to the economic global crisis which saw many countries’ economies deteriorate. Many regions experienced weaker consumer and corporate spending which negatively affected sales (Nokia, “Financial results review by board or directors” 3). The 2008-2009 period also suffered problems with credit availability as sources became constrained. As a result, it was hard for businesses to borrow reducing their expenditure and consumption levels. The company couldn’t access expansion funds easily and as a result, had to cut its expenditure and hold some projects which would have been influential in sales. Many markets were going through volatile currencies making it hard for Nokia to plan and roll out sales and promotion programs. Even though the markets started picking up by the end of the year and the demand environment improved, the damage was already too much on Nokia’s financial books as reflected on the year’s results.
It is also notable that the company completed its acquisition of NAVTEQ whose results before 2008 are not put into consideration in the financial analysis. The company has definitely enjoyed a positive growth since 2005 registering EUR 34,191 million, EUR 41,121 million and EUR 51, 058 million in 2005, 2006 and 2007 respectively. It is also expected that the company will register positive growth this year since the markets are more stabilized. The company has continued to roll out new products in the last year, targeting the low-end markets with very affordable mobile phones. It has also invested much in its technology and business model and has been named the world’s most sustainable technology company by the 2009-2010 edition of the Dow Jones Sustainability Indexes (Nokia, “Financial results review by board or directors” 3).
Works cited
Nokia Corporation and subsidiaries. Consolidated Statements of Financial Position, IFRS. Nokia, 2009. Web.
Nokia. Consolidated Financial Statements. Nokia, 2009. Web.
Nokia. Financial Results Review by Board or Directors. Nokia, 2009. Web.
Nokia. Nokia Group 2005-2009, IFRS. Nokia, Web.
Nokia. Nokia in 2009. Nokia, Web.