Nokia phone prices beat forecasts, stock jumps

Average selling price for handsets higher than expected, but analysts still wonder if that will mean higher profits.

Nokia, the world's largest cell phone maker, said its phone prices in the first quarter were above its and market forecasts, sending the company's stock to its highest level in more than two years.

Nokia said on Tuesday that the average selling price (ASP) for its handsets in January-March was 103 euros (about $124.80), the highest level in three quarters and above all expectations in a Reuters poll, which ranged from 94 to 101 euros, or about $113.75 to $122.20.

In January, Nokia said it expected the ASP in the period to be at best 99 euros.

Nokia's raised forecast reflected a smaller-than-expected proportion of cheap phones in the total sales mix during the quarter, it said in a statement.

Shares in Nokia jumped 4.1 percent to 17.67 euros in trading on Tuesday.

"Generally, the market itself is strong," said Andrea Williams, head of European equities at Royal London Asset Management.

Nokia, which has revamped its product portfolio since 2004 when it lost market share due design failings, was benefiting in the quarter from strong sales of its N-series multimedia phones, like the N70 model, analysts said.

"I have been expecting the mix to continue to shift toward the low end this year," said Evli analyst Ilkka Rauvola, who rates Nokia a "buy."

"But if the decline in the mix is stopping here, that would provide a significant upturn for those handset makers who are winning in terms of market share."

The three biggest handset makers--Nokia, Motorola and South Korea's Samsung Electronics, all won market share in the fourth quarter.

Regional impacts
Analysts said the statement cast some doubt on strong growth expectations for first-quarter volumes. Before the announcement analysts polled by Reuters had expected Nokia's quarterly unit sales to jump 30 percent year-on-year.

"Volumes have likely been smaller," said one Helsinki-based analyst. "My view is that it could be a regional mix impact, meaning that in the States and in the Americas improvements have continued, plus the 3G market has taken off."

At the end of last month, Nokia raised its global market growth forecast for this year to 15 percent or more from the 795 million units sold by handset makers in 2005.

"Given that the ASP was strong, what is the reason that they don't disclose more information? ... That I found not very helpful," said West LB's Thomas Langer, who rates Nokia "sell." "They are putting us a little bit in limbo. We don't value the company on ASP. We want to learn what kind of profits they can make on the phones."

Nokia, due to release full first-quarter results on April 20, said the announcement was made solely to comply with updated Finnish Financial Supervision standards, which require companies immediately to update on any change in published market outlook.

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