NOK expects slower sales until GPRS brain cookers arrive.
JohnG
By: Wyodude $$$$
Reply To: 73951 by Wyodude $$$$
Wednesday, 29 Nov 2000 at 6:45 AM EST
Post # of 73966
Nokia Facing Slower Sales Before Fast Phones Arrive (Update1)
By Jonas Dromberg
Espoo, Finland, Nov. 29 (Bloomberg) -- Nokia Oyj, the world's biggest cell-phone maker, is in an
unusual situation: For the next year or so it must persuade its customers to buy old-technology
phones.
That's because the faster mobile phones capable of surfing the Internet won't arrive until the
second half of 2001, giving customers a reason to delay buying. In the meantime, Nokia is
prettying up its existing phones with such new features as color screens and watertight casings
for canoeists.
``At the edge, you will have issues with replacement,'' said Alister Hibbert, who helps manage $20
billion in assets at Invesco Asset Management Ltd. in London. He expects up to 10 percent of
subscribers may consider delaying their purchase.
Rivals Motorola Inc. and Ericsson AB also are waiting for the faster service. Nokia's large share of
the cellular phone market, 27.5 percent, makes the Finnish company especially vulnerable to
slower demand for phones, analysts say. Nokia gets 72 percent of its sales and 81 percent of its
operating profit from making phones.
The issue is a temporary one. Sales are expected to accelerate once the new phones are
introduced. For now, it could affect the share price. When Nokia said in July that slower growth in
demand would cause third-quarter profit to decline, shares fell 21 percent.
Buying Phones
Nokia says people will keep buying its phones, first for new features on existing technology, then
later to navigate the Internet when so-called General Packet Radio Service, faster transmission,
arrives.
``The important thing to realize is that consumers' criteria for upgrading their existing mobile
phone models are extremely varied,'' said Matti Alahuhta, head of Nokia's phone unit, noting that
with 700 million phone owners worldwide, many select phones based on appearance or lifestyle
rather than new technology.
While some producers, such as Motorola, already have introduced GPRS phones, sales aren't
taking off because phone companies have not yet completed the networks to carry the signals.
Nokia doesn't expect GPRS sales to reach a significant level before the second half of next year.
Nokia estimates global mobile phone sales at 550 million units next year, up from an estimated
400 million this year. Of this year's buyers, the company says up to 50 percent will be users
upgrading their old phones.
Business Users
Still, Nokia's net income in the third quarter was 40 percent higher than the same period a year
earlier as it took market share from competitors. The stock is up 38 percent since the Oct. 19
report, trading today at 48.6 euros.
The change to the faster phones ``will likely cause some transition, but that will mainly be in the
business user segment,'' said Juha Ruskola, chairman of the Finnish Association of Electronics
Wholesalers.
Ruskola said business users, up to 25 percent of total mobile phone subscribers in Finland, will
buy the new GPRS phones in the second half of next year, bringing the full-year sales increase to
par with current forecasts.
``It may well be that some (business users) do want a GPRS phone and therefore don't upgrade''
before the technology becomes available, said Angela Dean, an analyst at Morgan Stanley Dean
Witter & Co.
Priced at High End
One company looking into postponing its buying decision is Stora Enso Oyj, Europe's largest
maker of paper. The company may buy fewer phones during the first half of next year than in the
second, according to Yrjoe Rouhunkoski, who oversees the buying of the company's mobile
phones in Finland.
Ericsson, the No. 3 cell-phone maker, said last month it will move handset production to some
low-cost countries to cut losses at the phone unit and allow plants in Sweden and the U.S. to
make network equipment.
The GPRS phones will initially be priced at the levels of current phones that use the so-called
Wireless Application Protocol, or WAP, to surf the Internet, said Ruskola. He added that the first
buyers of the GPRS phones likely will be mostly business users. The WAP-enabled Nokia 6210
costs $435 in Helsinki.
``Typically, the technologically most advanced models are first introduced within the higher-end
categories,'' said Nokia's Alahuhta. |
