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Technology Stocks : Nokia (NOK)

NOK 6.070

-1.5%

Dec 5 9:30 AM EST

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To: Joar who wrote (4432)	4/27/2000 7:30:00 AM
From: tero kuittinen	Read Replies (2) of 34857

Mmmmm.... this will do. Despite major R&D expenses on WAP, GPRS, EDGE and W-CDMA, the profit growth outpaced sales growth. The operating margin topped 20% - even though the new mobile internet technologies haven't had much of an impact on sales yet. The mobile network sales growth is the key number here; 36% tops expectations and shows that the division isn't the weak link, after all. Ericsson will have to show incredible network sales growth to hang on. Because it's already obvious that Nokia continues to mop the floor with the competition in the handset market. 88% sales growth with 24% profit margin is something that can't be compared to the consumer divisions of Motorola and Ericsson. So the only reason to buy Mot or Ericy would be their infrastructure strength. The issue here is the performance gap. Nokia has opened up a huge abyss between itself and the competition in the mobile phone biz. Can Motorola and Ericsson show that they have an equally enormous advantage in the infrastructure market? This is where that 36% comes in... Mot and Ericy would have to be able to show at least three times faster network sales growth than Nokia to offset their consumer product weakness. As long as Nokia's network sales hold up, this can't be done. Which makes the current valuations of Motorola, Nokia and Ericsson very hard to explain. They would imply that these three companies are equals... but the numbers don't back up that view. The full scale of the errors and misjudgments made by certain American commentators is now being revealed - one of the most disastrous bets for the year 2000 was the anticipation that Motorola would catch up with Nokia. This will end up devastating the performance of countless portfolios. It's a sad little episode of incompetence and nationalistic bias. The gross tactical mistake Motorola management made when it blamed the weak phone result on a component shortage and the European shift to cheaper models is now bathed in the merciless light of Nokia's 1Q results. These figures show no impact from a component shortage. They show no impact from a European shift to pre-paid phones. What this tells the world about the competence of Motorola's management is one of the hot topics for the next few weeks. Tero

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