Nokia's first-quarter network sales fall sharply
By Maija Pesola
Published: March 12 2002 09:37 | Last Updated: March 12 2002 15:03
Nokia, the world's largest mobile phone manufacturer, on Tuesday said it was on track to meet or exceed earnings guidance for the first quarter, but it warned that sales of network equipment would see a sharper decline than previously forecast.
Nokia said earnings per share to be at the upper end or slightly above the E0.15 to E0.17 range it forecast in January, but sales would be slightly below its previous estimate of a 6-10 per cent year-on-year decline. Revenues in the network business would be down 25 per cent year-on-year in the first quarter, rather than the 16-20 per cent decline it estimated in January.
It maintained its forecast for its handset unit, with sales expected to decline 3-7 per cent year-on-year.
Olli-Pekka Kallasvuo, the company's chief financial operator, said its networks unit had been hit by weakness in the Chinese and European markets for second generation mobile phone infrastructure.
He also said the company was still not recognising revenue from sales of third generation mobile phone equipment, which it was currently supplying to 35 customers.
"The underlying business volume is higher than you can see in our top line," Mr Kallasvuo said.
He said Nokia would begin recognising 3G sales by the middle of this year.
Shares in the Finnish company were down nearly 5 per cent at E25.80 in early afternoon trading and investors focused on the lowered sales targets.
Nokia's caution, which was followed by a revenue warning from Lucent, cast a gloom over the telecoms equipment sector with shares in market leader Ericsson down 7 per cent at Skr45.90.
Ericsson gains more than 80 per cent of its revenues from network infrastructure and some analysts had feared that it would follow Nokia and Lucent in revising its sales guidance. However, the Swedish company on Tuesday said it was sticking to an earlier forecast that the mobile systems market would remain flat or decline up to 10 per cent.
"Our expectation is to be at least in line with that forecast," said Mats Dahlin, head of Ericsson's Network Operators and Service Suppliers unit.
Nokia's assurances that it could maintain profit targets despite the decline in sales were met with some scepticism on Tuesday.
"The mystery is being repeated. This is the third time in a year that Nokia has met its self-proclaimed earnings guidance despite missing its sales targets," said Per Lindberg, analyst at Dresdner Kleinwort Wasserstein.
"If Nokia gains income from an increase in sales, I can't understand why the opposite isn't true. It defies all forms of logic."
The sharper-than-expected decline in sales also raised more concerns about Nokia's ability to meet its full-year target of 15 per cent revenue growth.
Analysts have already expressed doubts about this target, arguing that in order to get back on track after the first quarter, for the rest of year Nokia would need to achieve sales growth of about 27 per cent in the networks unit and 22 per cent for handsets.
The guidance came as Nokia unveiled six new mobile phones, including one long-awaited colour-screen handset at Cebit.
Investors have focused on colour screens as a key move in invigorating the stagnating European mobile phone market, and Nokia has come under increasing pressure to roll-out a colour product after Swedish rival Ericsson brought out a hugely popular colour-screen model, the T68, last year.
Nokia said the colour-screen phone would go on sale in the third quarter, while the other phones, which include features such as polyphonic ringtones, multimedia messaging and java-based applications, will go on the market in the second quarter.
The company also briefly outlined plans to launch third-generation mobile phones on September 26 this year.
news.ft.com |
