Nokia Becomes Europe's Second-Most Valuable Company as Phone Sales Soar
Espoo, Finland, Nov. 30 (Bloomberg) By Jonas Dromberg
Nokia Oyj, the world's top cellular phone maker, became the second-biggest European company in terms of market value, boosted by faster-than- expected growth in phone sales.
The shares of the Finnish company, worth 182 billion euros ($184 billion) at yesterday's close, have risen 75 percent in the last six weeks. The stock is up 380 times since 1992, helping it to overtake Germany's top phone company Deutsche Telekom AG. Europe's leader, BP Amoco Plc, is worth 9 percent more. Today, Nokia's stock is down 8 euros, or 5 percent, at 142. ''Nokia is in a class of its own when it comes to mobile telecommunications,'' said Mika Heikkilae, a fund manager at Conventum funds. He sees Nokia becoming one of the top five companies in the world within three years.
Nokia, the first company to introduce an Internet phone based on the Wireless Application Protocol, has overshadowed competition by releasing sleeker phones with more functions. Surging global demand for mobile phones is also providing a boost, and easing of export restrictions to China, Nokia's second- largest market, is expected to add to profit.
Global Reach
The company should be worth more than Deutsche Telekom, partly because it operates throughout the world, analysts said, while Deutsche Telekom, which earlier this year failed to buy Telecom Italia SpA, has a smaller market. Nokia has a price- earnings ratio of 70, while Deutsche Telekom has 68 and Telecom Italia 45. BP Amoco, by comparison, has a ration of 60.
Two weeks ago, Nokia momentarily passed Deutsche Telekom, before the German stock was boosted further by takeover speculation, sparked by Vodafone AirTouch Plc's $142 billion offer for Germany's Mannesmann AG.
The Espoo, Finland-based company is also benefiting from problems experienced by competitors, such as Sweden's Ericsson AB, the world's third-largest phone maker.
Customers are opting to buy Nokia products because they have had to wait for phones made by Ericsson, which is suffering from production problems for its top-of-the-range T28 model.
Internet Access
While Nokia has already won the race for the regular cellular phone market -- it's expected to have almost twice the market share as runner-up Motorola Inc. -- the top slot for cellular phones that access the Internet is wide open. Nokia, however, may have a head start. As early as 1996, Nokia introduced the 9000 Communicator, which allowed simple communication with the Internet.
Ericsson is worth 47 percent less than Nokia at $98 billion, while Motorola is worth 60 percent less at $73 billion. ''When it comes to Internet-based solutions, Nokia has been building a larger gap to Ericsson,'' said Heikkilae.
In a recent report, Morgan Stanley Dean Witter said that ''despite the recent share price rise, we continue to feel that Nokia is not being valued as the industry-shaper it has become.''
Cisco Systems Inc., the world's largest maker of Internet equipment, is worth more than $310 billion by market value, almost twice Nokia. ''The fact that most of Nokia's products are somehow related to Internet or data processing'' has forced analysts to benchmark Nokia with Internet stocks, said Michael Schroeder, an analyst at Opstock Securities.
While the Internet surfing cellular phone is expected to become a big seller, a combined phone and personal organizer will be popular with people who don't need the Internet, analysts say.
Palm Tops
Nokia said last month it will develop a product with 3Com Corp., the world's largest maker of palm-top computers. The product, to start shipping in two years, will include a phone, address book, daybook, and other pen-based products -- no keyboard needed.
Finland, which boasts the highest percentage of cellular phone users in the world -- two out of three Finns have one -- is at the forefront of accepting new cellular technologies, thanks to Nokia.
Sonera Oyj, the country's top phone company, leads in offering Internet services based on wireless application protocol technology -- it already has 150 services ranging from trading stocks to ordering flight tickets.
Nokia, which has consistently beat earnings expectations, said last month third-quarter profit rose 38 percent to a better- than-expected 638 million euros as new models that appeal to teen- agers and business people outsold the competition. ''We really feel good about the competitiveness of our products in a market that is growing faster than expected,'' said Chief Executive Jorma Ollila when third-quarter earnings were released. Nokia rose 2.6 percent, and 6 percent a day after the announcement.
Nokia, which will produce almost 68 million phones this year, accounts for more than 60 percent of the Helsinki Stock Exchange. If the value of Nokia was divided among all 5 million Finns, each could buy a luxury car worth 35,000 euros.
Bloomberg Technology News Tue, 30 Nov 1999, 7:39pm EST |
