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Technology Stocks : Nokia (NOK)

NOK 6.910

-0.9%

3:59 PM EST

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To: slacker711 who wrote (19426)	4/9/2002 9:26:30 AM
From: slacker711	Read Replies (3) of 34857

Tero's take on the faulty display issue....I dont see a press release by Nokia so the comments might be in an article that doesnt appear on Yahoo. Tero Kuittinen Big Brawl 4/09/02 07:55 AM ET In a way, the recent Dresdner Kleinworth comment on Nokia's phone faults is a good example of how radically the equity research has changed recently. There's a lot more leeway than there was a few years ago. DK has claimed that 70% of Nokia's phones are faulty and that the recall costs are 6 dollars per model. Nokia issued an angry denial today that contained language not often seen in company commentary. According to the company, the conclusions of the DK report were wrong, the data points were false and that DK refused to acknowledge Nokia's corrections before publishing the report. What I find astonishing here is two things: first the Dresdner claim of a 70% fault rate in Nokia's global phone volumes. That's an extremely radical assumption -- anyone with contacts to Chinese or American retailers knows that it's false. My assumption is that the faults originated for a single batch of phones and were corrected by January -- concerning mostly Northern European markets. It's impossible to produce 160 million units annually without having this happen somewhere around the world. That's far from 70% global fault rate. The second oddity is the Dresdner calculation of the recall cost at 6 dollars per phone -- the industry average is one dollar. So DK invents a 70% fault rate... then it assumes a fantastic 500% premium on the industry average cost of recall... and then they arrive to a 150 million euro recall cost. For some reason DK hints that this is going to influence Nokia's earnings -- even though the component firm has full liability for all recall costs. This is the industry norm. Component vendor has the responsibility. It's refreshing that analysts no longer believe the company spin automatically. But disregarding unequivocal company guidance on specific issues is something new. It sure is going to be interesting to see what the 1Q Nokia numbers are. The credibility of both Nokia and Dresdner is not going to survive this intact -- one of them is way out of line. long on Nok

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