Nokia is harbinger of networks gloom
Update suggests tough 2002 for wireless equipment By Chris Nuttall FT Investor, 12:21 GMT Mar 12, 2002
LONDON (FT Investor) - Nokia's mid-quarter update on Tuesday had only two items of interest in two brief paragraphs of information, but still managed to move shares significantly.
mwprices.ft.com
Overall sales should be lower than forecast in January due to a 25 per cent year-on-year fall in sales in the Networks division, compared to 16-20 per cent predicted earlier, it said.
Earnings should be at the top end or even above the earlier guidance of €0.15 to €0.17 per share due to... well, Nokia did not exactly say apart from citing its "strong brand, excellence in execution and winning portfolio."
The earnings prediction had been correctly forecast by analysts so the markets took the unexpectedly lower sales as their cue.
Nokia [000053994, News, Chart, Research] [NOK, News, Chart, Research] shares were down and Ericsson's [000010865, News, Chart, Research] [ERICY, News, Chart, Research] fell even further in Helsinki and Stockholm reflecting their relative dependence on selling wireless infrastructure equipment to operators compared to mobile phones to consumers.
Market share
Ericsson is the biggest seller of telecoms equipment in the world with a market share of about 12 per cent and sales of $4.13bn in the third quarter of 2001, according to Synergy Research. Nokia sold 35 per cent of all mobile phones in 2001.
Other leading equipment vendors, Alcatel [013000, News, Chart, Research] and Siemens [723610, News, Chart, Research], were down 6.1 per cent and 2.5 per cent respectively in Paris and Frankfurt.
Alcatel was also hit when its close competitor Lucent [LU, News, Chart, Research] warned second quarter revenues would fall short of expectations as service providers continued to defer or reduce spending. See story
Merrill Lynch last week painted a gloomy picture for wireless spending among operators for not just 2002, but 2003 as well.
It saw a 5 per cent reduction this year and a further 5 per cent fall on 2002 in 2003, compared to its previous estimate of 12 per cent growth in 2003. See previous Telecom Daily
The broker cited 3G investments being pushed out, unavailability of handsets, deployment of low-cost network options and the pricing pressures of too many players in the market as reasons for its reduced forecast.
So Nokia's cut in its sales forecast so early in 2002 suggests Merrill's pessimistic predictions could come to pass.
Chris Nuttall is a reporter for FT Investor in London |
