Nokia to the Rescue
By Chris Rugaber (TMF RFK)
October 19, 2000
Finnish mobile handset manufacturer and Rule Maker Nokia (NYSE: NOK) reported third-quarter earnings this morning, coming in significantly higher than analysts' expectations.
The company also issued positive forecasts for next quarter and for mobile phone sales in 2001. Nokia was scheduled to report earnings next week, but apparently decided to do so earlier in response to the recent volatility in technology and telecom shares.
Sales rose 50% over last year's third quarter to 7.57 billion euros ($6.38 billion), while net income jumped 40% to 892 million euros ($752.22 million), or 0.19 per share. Pretax profit increased 43% to 1.34 billion euros ($1.13 billion), ahead of analysts' forecasts of 1.06 billion.
Nokia's shares had declined about 40% since the company's July warning that third-quarter profit would be lower than the second quarter's, due to product delays. Today's report, and the company's optimistic outlook, reversed that trend, with shares up 18% in European trading.
Mobile phone sales, which account for almost three-quarters of the company's revenues, increased 59%, while operating profits for the division were up 42% to 1.07 billion euros ($900 million). Operating margin decreased to 19.6%, from 21.9%, though the company remains far ahead of No. 2 mobile phone maker Motorola (NYSE: MOT), which recently posted a 6% operating margin for its cell phone division.
Nokia introduced seven new handset models in the third quarter, and the company believes it increased its handset market share, which stood at 27.5% at the end of the second quarter. Motorola controlled 15.6% and Ericsson (Nasdaq: ERICY), which reports earnings tomorrow, held 10.3%.
While other mobile phone companies, such as Motorola and Matsushita, have reduced their projections for industrywide handset sales, Nokia maintained a positive outlook.
"Our view of the market development fundamentals remains
unchanged, with more than 400 million mobile phones estimated to be sold in 2000," said CEO Jorma Olilla in a prepared statement.
"For 2001 we expect the mobile phone market to be in the region of 550 million units." Olilla also stated that as a result of these figures, the company expects there will be 1 billion mobile phone users by 2002.
Sales in the company's wireless infrastructure unit were also strong, with revenues up 34% to 1.92 billion euros and operating margins improving to 18.1% from 17.3%.
Overall, the company expects "record-breaking" earnings per share(EPS) for the fourth quarter, and 25-35% sales growth in 2001.
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