January 31, 2001
Nokia Lowers Estimates
"Mr. Hedman of Nokia denied that product introductions were behind schedule and said
that the company was meeting targets of introducing next-generation handsets
by the third quarter, with sales of the handsets expected to reach millions of units by the fourth quarter."
By SUZANNE KAPNER
From The New York Times
LONDON, Jan. 30 — Nokia of Finland, the largest maker of mobile phones, warned today that handset sales for the entire industry would slow this year from earlier estimates as consumers bide their time in expectation of next-generation services that will not come to market for months.
Nokia's trimmed-back estimates come on the heels of a similarly dampened forecast by its big Swedish rival, Ericsson, and reinforce concerns that the break-neck growth is abating at a crucial juncture.
Nokia warned that profits in the first quarter would be flat compared with year-ago levels as it cuts mobile phone prices to gain market share. It also said global handset sales for all of 2001 might range between 500 million and 550 million, although its chief executive, Jorma J. Ollila said
during a conference call with analysts that he expected the level
to be closer to the bottom end of that range.
"We just don't know exactly what is going to happen," Mr. Ollila said, adding that the level of uncertainty had been magnified by the economic slowdown in the United States.
To some, the message was clear. "The headline is: Game Over, at least for the next few quarters," said Thomas Langer, an analyst with WestLB Panmure in London.
Shares of Nokia tumbled in trading in Helsinki before recovering to end down nearly 7 percent, at 37.12 euros ($34.40). In New York, American depository receipts of Nokia closed down 6 percent, to $34.83.
Still, Nokia indicated it would not pursue a retrenchment recently announced by Ericsson, which on Friday said it would farm out all its handset production. Nokia, which derives 70 percent of sales and more than 80 percent of operating profit from mobile phones, said it would become
more aggressive to protect its already outsized market share.
"Manufacturing is a core business for us and a key competitive advantage," said a Nokia spokesman, Tapio Hedman, adding that Nokia has no plans to contract out much more than the 10 percent of its handset volumes.
Even though Nokia's handset margins are expected to fall to 20 percent by year-end, compared with 21.3 percent in the fourth quarter of last year, that is still far higher than levels reached by rivals, and gives Nokia room to be more aggressive, analysts said.
"Nokia is saying let's leverage our powerful balance sheet and squeeze some marginal players out of the market," said Wojtek Uzdelewicz, an analyst with Bear, Stearns. "That's probably the best strategy right now. Even if this costs Nokia some profits in the near term."
Nokia also reported strong fourth- quarter and full-year profits today that matched analysts' estimates.
The fundamental problem facing Nokia and Ericsson, as well as Motorola of the United States is that the furious sales growth rates for handsets have tapered off as the global penetration rate of mobile phone subscribers reached 12 percent last year. Picking up the slack was to be a range of
next-generation digital services that require specially designed handsets.
But with the rollout of these new services taking longer than initially expected, mobile phone companies are facing a lull, analysts said.
"We're facing a new product vacuum," Mr. Uzdelewicz said.
Mr. Hedman of Nokia denied that product introductions were behind schedule and said that the company was meeting targets of introducing next-generation handsets by the third quarter, with sales of the handsets expected to reach millions of units by the fourth quarter.
"Every new technology has its challenges," Mr. Hedman said. "But we see no unexpected problems."
nytimes.com |
