Too Early to Count Effects of U.S. Air Halt -Nokia
September 13, 2001 5:28 am EST
By Paul de Bendern
HELSINKI (Reuters) - Nokia said on Thursday it was too early to predict the impact of halted flights to and from the United States on the ability of the world's largest cellphone maker to deliver phones to customers.
"Until there is definite information based on statements from the FAA (Federal Aviation Administration) about when flights will resume, it is too early to make any projections as to the impact the situation might be for us," Nokia Mobile Phones spokesman Tapio Hedman told Reuters.
"If the situation is temporary, as it is relatively likely to be, the effects will be quite limited," he added.
The closure of U.S. airports and halting of air traffic since Tuesday's deadly terror attack in New York and Washington has affected shipments from companies like Nokia.
Disruptions in Nokia's logistics network -- seen as one of the best in the industry -- only for a few days could have significant effects on the company's ability to deliver to customers because it is such a big supplier of phones.
"If you look at volumes Nokia will absolutely be the worst hit if the delay in shipments lasts a week or two," said Nordea Securities senior analyst Mika Paloranta. "This could hurt Nokia. It could hurt its earnings."
Hours before Tuesday's terror attack, Nokia reaffirmed its third-quarter profit target, helped by U.S. demand, but the firm said it would see lower overall sales.
Nokia has a 35 percent share of the global handset market, more than double that of its nearest rival Motorola, and is expected to produce around 140 million phones this year.
Many of those phones are destined for the United States.
Last year, the United States was Nokia's biggest market with sales of 5.31 billion euros ($4.82 billion) out of total sales of 30.38 billion. China was its second biggest market.
Hedman stressed that Nokia had nine mobile phone plants with three in each continent and only one in the United States.
"The clear majority of our manufacturing is for local or regional demand, meaning that the amount of exported production from, for example the U.S., is clearly a minority," he said.
In the United States phones are shipped across the country mostly on lorries and trucks and the same was the case in Europe, another key market for Nokia.
"Our logistics principle has always been that we have the capability of compensating for interruptions in one factory by increasing operations in another," he said. "All our factories have the capability to produce every model in our portfolio."
Nokia, with a staff of almost 60,000 globally, said it had immediately begun discussions with components suppliers and other companies connected to Nokia production after U.S. transportation was halted.
"We do have the buffer of components in our manufacturing facilities," Hedman said.
Less than 20 percent of Nokia's total handset production is outsourced to external companies, much less than rivals. Ericsson, the world's third largest mobile phone manufacturer, has outsourced all production of phones.
Because most of Nokia's production is in-house, it has more control of production than some of its rivals.
Nokia shares traded three percent higher at 16.69 euros on a firm Helsinki bourse. ($1-1.102 Euro)
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