10/20/2011 06:28 EDT | Updated 12/20/2011 05:12 EST

Nokia Posts $95 Million Loss As Sales Plunge

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HELSINKI - Nokia Corp. narrowed its losses more than anticipated during the third quarter even though its smartphone sales continued to suffer in the face of stiff competition from Apple Inc.'s iPhone.

Finland's biggest company reported a third-quarter net loss of €68 million ($94 million). Though that's a big reverse from last year's equivalent profit of €529 million, it represented an improvement on the second quarter's €368 million loss.

However, the loss was not as big as many in the markets feared and shares in the company jumped more than 12 per cent on the news before closing up more than 5 per cent at €4.72 ($6.52) on the Helsinki Stock Exchange on Thursday.

"Nokia is down but not out. Volume shipments were above expectations, profit decline not quite as bad as expected and some regional numbers surging," said Neil Mawston from London-based Strategy Analytics. "There are signs of some stabilization here."

Despite signs of encouragement, Nokia continues to suffer from heavy competition in the smartphone market. Its sales of smartphones dropped 39 per cent to €2.2 billion, from €3.6 billion a year earlier, knocking overall revenue by 13 per cent to €8.9 billion.

Nokia CEO Stephen Elop was more upbeat than he has been of late, saying Nokia's smartphone portfolio "performed well" despite the huge drop in sales and that it had gained market share in some markets, including India, where it sold 18 million dual SIM card handsets in the quarter.

"In Q3 we started to see signs of early progress in many areas. We made some difficult decisions but we also celebrated some early moments of success," Elop said in a conference call. "As we head into the fourth quarter we are looking forward to generating more success as a result of delivering against our new strategy."

Nokia, which used to hold the innovative edge in the mobile market, has been losing the race in the smartphone sector, as it is being squeezed in the low end market by Asian manufacturers like ZTE and in the high end by the iPhone and Research in Motion's Blackberry devices.

The company is hoping to partly remedy that with a new Windows Phone 7, expected to be launched next week in London after it opened a partnership with Microsoft Corp. in February.

But analysts have said it would take a few quarters before Nokia's success can be measured.

To cut costs in the face of fierce competition, Nokia announced more than 10,000 layoffs this year in an attempt to reduce operating expenses by €1 billion by 2013. It has not ruled out more cutbacks.

It has also dropped phone prices, with the average selling price of mobile devices falling to €51 in the quarter, from €65 a year earlier.

Reflecting the lower prices, volume sales in Asia-Pacific, previously Nokia's second-largest market area, grew 17 per cent to take the top spot, while the Asia-Pacific region saw a volume surge of 41 per cent. Volume sales in Europe, which had been Nokia's top selling region, fell 30 per cent.

Nokia has been the world's top cellphone maker since 1998 selling 432 million devices last year — more than its three closest rivals combined. But after reaching its announced global goal of 40 per cent market share in 2008, it has been struggling against rivals making cheaper handsets in Asia. That sent Nokia's market share below 30 per cent earlier this year.

In the second quarter it had a total market share of 24 per cent, ahead of South Korea's Samsung Electronics which had an almost 21 per cent share.

It said the lower volumes were due to the "strong momentum of competing smartphone platforms" relative to Nokia's higher priced Symbian devices, as well as "pricing tactics by certain competitors."

The Espoo-based company, near Helsinki, employs 136,000 people — up from 132,000 a year ago.