Looks like Jorma gave us the peachy/rosy version. The analysts have their doubts and are punching holes into the peachy/rosy version.
Nokia hits Q2 targets, share suffers on outlook
Reuters, Jul 18 2002
By Paul de Bendern
HELSINKI, July 18 (Reuters) - Nokia <NOK1V.HE> posted higher second-quarter profits in line with expectations on Thursday, but shares in the world's largest mobile phone maker fell as analysts said its forecasts left room for disappointment.
Nokia, in the process of launching a record number of new phone models to keep ahead of fiercer competition, said it would post second-half sales growth of three to 10 percent, compared to an earlier target of up to 10 percent growth.
Nokia also forecast earnings per share, excluding goodwill amortisation and non-recurring items, of 0.79-0.84 euros for 2002, compared to a previous estimate of 0.83 euros.
While the forecasts were basically unchanged, the company gave itself greater margin for error by broadening the range, putting pressure on Nokia shares.
"Everything seems to have come down a bit in terms of their outlook," said analyst Susan Anthony at Credit Lyonnais.
"You have to assume a really bumper Q4 for Nokia to get to their full-year EPS target," she said, echoing what several analysts in the market are concerned about.
The mobile industry is entering its second year of annual decline as cash-strapped telecoms operators are unable to spend money to upgrade their networks and consumers are reluctant to buy new handsets.
Nokia shares bounced up and down after the statement, trading three percent lower at 13.94 euros at 1050 GMT after earlier rising three percent.
Nokia disappointed the market by saying it would take a material charge in the third-quarter against its 752 million euro financing exposure to German operator Mobilcom <MOBG.DE>. [This is a potential Achilles heel for Nokia. Vendor financing of cash-strapped carriers is a really dicey proposition, especially at more than 100% of the sale. A few defaults and the bottom line could suffer. Q seems to have fortunately taken its poison on that score. Nokia's exposure is, by comparison, probably higher]
Nokia shares have halved this year and have underperformed the Dow Jones Tech Index by around 10 percent. The stock is also about 80 percent off its June 2000 peak.
The figures are expected to help set the tone for European markets as the reporting season gets into full swing.
MOBILE SALES STALL
Nokia is a bellwether for the mobile phone sector and was a must-have stock for many fund managers in Europe and the United States during the runaway growth era for mobile phone companies in the late 1990s.
Nokia said it now only expected 400 million handsets to be sold this year, compared to a previous forecast of industry sales of up to 420 million units. The new target is in line with that of its nearest rival Motorola <MOT.N> and represents a second successive year of flat sales. [It'll be more like 380 million, but what is 20m among friends?]
Analysts said Nokia's third-quarter profit and sales forecasts were slightly cautious, with a pro forma EPS of 0.15-0.17 euro range and net sales of 7.2-7.6 billion euros.
"I am somewhat disappointed by third quarter EPS guidance, which is slightly below what I am forecasting but then I am ahead of consensus," said Hendrik Zonnenberg, wireless analyst at ING Barings in Amsterdam.
Nokia posted a pro forma EPS of 0.19 euros in the second-quarter, within the 0.18-0.20 euro range it had set in June. Last year's quarter EPS was 0.17 euros.
"Thanks to our consistent record of strong execution and tight cost control, we were able to put in a solid second quarter," Chief Executive Jorma Ollila said in a statement. [Sure, squeeze the suppliers. But that game can be played only for a limited time. R&D suffers, too.]
Nokia's huge brand, economies of scale and ability to quickly adjust to changing demand has enabled it to ring in strong profit figures despite falling sales.
Pre-tax profit totalled 1.29 billion euros ($1.30 billion) in the quarter, up from 1.17 billion a year ago. Net sales came at the low end of the company's forecast, down six percent to 6.94 billion euros -- hurt by a 22 percent drop in sales of its hard-hit networks equipment division.
MARKET SHARE RISES
Nokia said its market share in mobile phones grew to over 38 percent in the April-June quarter.
It also said it expected 2002 market share to be higher than last year's 37 percent. The company also managed to ring in the industry's strongest margins for phones, coming in at 22 percent in the second quarter. It said it expected operating margins of around 20 percent for handsets in the second-half of 2002.
Nokia hopes hope the recent launch of new devices, this time based on so-called multimedia messaging services (MMS) technology, will kick-start the market in the second-half, particularly because many models have colour screens.
It is coming under increasing pressure from competitors likes Sony Ericsson <6758.T> <ERICb.ST>, Motorola and Samsung, particularly at the top end of the market. [Today's Vodafone announcement on camera phones from Japan isn't going to help one bit.]
The company also threw doubt about the outlook for the third-generation mobile phone market by saying it did not expect to start commercial shipments of 3G phones until early 2003. Previously it had said it would start shipments in the third-quarter with volume deliveries in the fourth quarter. (Additional reporting by Gideon Long in London and Brett Young in Helsinki) [September 26 where are yoooooooooou?]
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