Nokia’s profit drops

Nokia reported an increase in sales for the first quarter, but profit declined and the company expects a challenging second quarter as it bears the full brunt of component shortages resulting from the earthquake in Japan.

Sales for the quarter totalled €10.4 billion (US$15.2 billion as of March 31, the last day of the period reported), up 9 percent compared to a year earlier, helped by favorable exchange rates. However, year-on-year, net profit dropped from €349 million to €344 million.

The two big events during Nokia’s first quarter were the announcement that it will move to Microsoft’s Windows Phone as its main smartphone OS — which CEO Stephen Elop described as a call to arms for its employees during a conference call — and the earthquake in Japan.

Nokia and Microsoft have now signed a definitive agreement.

Microsoft will receive a royalty payments from Nokia for the Windows Phone platform, starting when the first Nokia products ship. Nokia will contribute mapping, navigation, and some location-based services to the Windows Phone ecosystem, and will receive payments “in the billions of dollars,” Nokia said in a statement on Thursday.

The two companies have also made “significant progress on the development of the first Nokia products incorporating Windows Phone,” the statement said.

Nokia’s goal is to start shipping larger volumes of Windows Phone-based smartphones in 2012.The company won’t announce ship dates until closer to when the first phones arrive, but the pressure is on to deliver the devices this year, according to Elop. Nokia also plans to launch its own application store, where developers will be able to sell apps for Windows Phone, Symbian and Series 40 devices. Users will be able to take advantage of operator billing deals that Nokia has in place.

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