Lex: Nokia
Published: January 9 2001 20:53GMT | Last Updated: January 9 2001 20:55GMT
Calling Sherlock Holmes. There is a mystery to solve. One month ago Nokia gave analysts a rosy picture of the mobile business - revenue growth of 30 to 35 per cent in the first half of 2001 and a market of 550m mobile phones. On Tuesday it reported 2000 sales of 128m - below the most bullish forecasts - and a market of 405m phones, some 20m short of consensus, though not its own more cautious estimates. Investors marked the shares down 9 per cent.
Nokia knew the first 11 months' sales figures when it gave its upbeat statement in December. So there are two possibilities. One is that December sales volumes fell far short of expectations, fourth quarter results will disappoint, and the company will have to reduce forecasts. The other is that many analysts overestimated sales (and underestimated prices) earlier in the year. This is more likely, and would explain why Nokia never raised its forecast of a market size of more than 400m in 2000.
On a sober estimate of sales in the first nine months, Nokia would appear to have sold 40m phones in the fourth quarter with market share of more than 33 per cent. This looks like the familiar story of Nokia gaining market share and securing growth at the expense of Ericsson and Motorola - and is compatible with the guidance for 2001.
There are reasons for caution about 2001 - market growth will slow as penetration starts to peak in western Europe. But Nokia's market forecasting is unrivalled, and even if market growth falls short, there is scope for further share gains. Investors should worry more about Ericsson and Motorola.
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This is the first time Nokia has published its sales figures separately from its full year results, due out on Jan 30. This prompted speculation that publication had been brought forward to pre-empt the any weakness in results from Motorola, the second largest handset manufacturer, to be announced on Wednesday.
Nokia warned against reading too much into the timing. "We thought it was still a long time before full year results and there was no reason to keep the figures behind the curtain for three weeks," it said.
The company also pointed out that the estimate of global sales was in line with its earlier forecasts. It estimated the global mobile phone subscriber base had climbed above 700m, representing a global penetration of approximately 12 per cent.
Nevertheless, its results are the latest bad news to hit the mobile sector, which is still reeling from the higher-than-expected cost of building third generation networks.
Some analysts are also concerned that growth from replacement handsets will also prove lower than expected due to the slow roll-out of new intermediary technologies ahead of third generation.
Others claim replacements will prove to be saviour of the handset industry.
"If you look at the replacement market for televisions or VCRs, you have life cycles of 10 years. For a mobile phone it is probably on average about two years, and about one-and-a-half in western Europe and nine months in Japan," said Dataquest's principal analyst Peter Richardson.
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