All the analysts tend to be very pessimistic at this time and even in their views forward. Here's a personal view from an optimist.
I fully expect Nokia to gain market share during this tumultuous year, from an estimated 35% at end of 2000 to about 38% at the end of 2001 – an average of 36.5% share for the year. Based on that assumption, I’ve run through some speculative (but optimistic) numbers that illustrate the management challenges – and opportunities – for Nokia.
If 450 million units are sold worldwide, the 36.5% share means 164 million units for Nokia, a growth of 36m units or 28%. With 500 million units worldwide, Nokia’s share is 182 million, a growth of 54 million or 42.5%. Assuming the average of 475 million units sold gives 173 million units for Nokia – plus 45 million or 35% growth. Network growth should be about the same. So the 2000 EPS of $.75 times 1.35 gives a potential EPS of $1.01. But margins are sure to decline. With a 15% drop in margins, a more realistic EPS number is $.86.
With handset replacement rates going to the vicinity of 60% in 2002 and GPRS volumes beginning, Nokia might further extend its market share to 40%. Assume that the market rebounds to maybe 600 million units, a growth rate of 26.3% vs only 17% growth in 2001. At 40% market share, Nokia would deliver 240 units – plus 67 million or plus 38.7%. So $.86 EPS grows to $1.19 if margin stays the same. If you add back in the 15% margin decline in 2001, EPS potential becomes $1.37.
Good potential, but great challenges, for a world class management team – to accurately forecast the market, pick the right products, order the right amount of components, select the right volumes of each product, deliver on time across the world and at the same time control expenses and achieve margin targets.
For comparison purposes, CSFB’s latest forecasts are for Nokia to achieve an EPS of $0.82 in 2001 and $1.06 in 2002. But, like I said, I’m an optimist!
Sisuman |
