re: Reuters Update on USB PJ Tech Conference et al
>> New Phones Protect Nokia From World Recession
8th August 2002
Reuters
After lowering its second-quarter expectations, Nokia says a new replacement cycle will help the firm meet its full-year targets.
Pressure to replace aging mobile phones will anable Nokia to meet its full-year financial targets despite weak US and European economies, chief executive Jorma Ollila told investors on Wednesday.
The head of the Finnish mobile communications equipment maker told US money managers at an investor conference, that new features such as picture messaging, colour screens and Internet-friendly networks will shore up Nokia's second-half revenues, even if major economies continue to deteriorate.
"We have taken a very conservative look at the US and at the European economies as (they) might evolve," the head of Europe's most-closely watched technology company assured jittery investors during a presentation before the Piper Jaffray Technology & Telecommunication conference.
Working in Nokia's favour are pressures to replace phones dating from the industry boom year of 2000, when 405 million phones were sold worldwide, Ollila noted.
"(Year 2000) was a particularly strong growth period. Those phones will be two and a half years old, which will kick in a natural replacement cycle ... (and that) is balancing the possible negatives," he said.
Three weeks ago, Europe's leading technology company cut its second-half 2002 sales growth to 3 to 10 percent, compared with an earlier target of up to 10 percent growth.
Stands By Targets
On Wednesday, Ollila stood by Nokia's second-half targets, which also call for full 2002 year earnings per share of 79 eurocents to 84 eurocents, excluding planned charges to cover a bad investment in German mobile service provider Mobilcom.
Shares, which were trading dead-even on the day ahead of the Nokia chief executive's remarks, traded 3 percent lower, but then gained back some of the losses to end down 3 cents at $11.25 on the New York Stock Exchange.
Ollila said he remained confident that the company could achieve a global market share of around 40 percent later this year, up from 37 percent last year. He repeated that the industry as a whole would serve as many as 1.125 billion mobile phone customers by 2005, up from around one billion users now.
Nokia's strong brand and low-cost manufacturing relative to competitors have allowed it to fend off the worst of pressures felt by other European and US mobile phone gear makers such as Ericsson and Motorola, he said.
The Nokia executive said consumer willingness to replace their phones was now at an historic cyclical high and that the average two-and-a-half year replacement cycle had stabilized after slipping late last year and earlier in 2002.
Ollila said that Nokia was seeing a revived willingness by European mobile service providers to offer subsidies on costly new handsets that boast the capacity to snap and swap pictures wirelessly, as well as new colour screens.
"We have seen a beginning, the first phase only," he said in response to a fund manager's question. Ollila cited news reports that a German operator was subsidizing half the cost of its new 7650 camera phone, the list price of which runs upward of 800 euros, or about the same amount in US dollars.
No plans to subsidise sales
The extent of Western European operators' willingness to subsidise phones will be apparent in six to eight weeks, once mobile operators across Europe finish upgrading their networks to allow picture messaging and other features, he said.
Answering concerns Nokia may be forced to help subsidize sales of its new products, Ollila said Nokia had no such plans.
He said vendor financing by telecom equipment suppliers was a bad idea imported into Europe in recent years from the US, where rival Motorola had used the scheme during the 1990s. "There will not be a role for us subsidizing. That would not be in line with our historic role," Ollila said.
Earlier in the day, the Finnish telecom equipment maker said its networks division aimed to cut about 900 jobs, or about 5 percent of the unit's workforce. The cuts will be made by the end of the year, and are part of a bid to boost efficiency amid a weak market for network equipment upgrades.
Nokia gave no estimate for the cost savings to be achieved and Ollila declined to comment further on the move.
The job cuts come amid generally weak demand so far for the gear used to upgrade networks to offer advanced voice and data features. Nokia said it would mainly affect personnel in network delivery and maintenance functions. <<
- Eric - |
