Nokia to face an uphill battle in 2003 to meet goals: analysts
Agence France Presse
PAAL AARSAETHER
HELSINKI, Jan 21
Nokia, the world's largest mobile phone maker, is finding it harder and harder to meet its performance targets as phone sales slow, and may admit as much at its annual results presentation Thursday, analysts said.
Nokia has a long-standing target of raising its handset market share to 40 percent this year, from around 37 percent now, but analysts say this battle looks tougher than ever.
In particular, it will require making strong headway in the Americas, Japan and South Korea, where the mobile phone standard is CDMA, which competes with the GSM standard dominant in Europe, Africa, the Middle East and Asia-Pacific regions. "If they cannot improve their CDMA sales, their goal of 40 percent cannot be reached, since this means a market share in GSM of between 47 to 48 percent, which is a fairly tall order," Erkki Vesola, analyst with Mandatum Bank, said.
Karri Rinta, telecom analyst with Evli Bank, concurred: "The times of smooth sailing are definitely behind them."
Nokia has just 10 percent of the CDMA market, and a market share close to 50 percent in Europe, analysts said.
"There is a tight competition already in the CDMA market, where Nokia has to face Samsung, LG and Motorola. It's a tough battle that will take a long time before they can notably improve their position," Vesola noted.
With the launch of third-generation (3G) services still elusive, Nokia and its rivals this year will have to turn every stone in their existing markets, as well as develop a few new ones, to grow their businesses.
"It makes sense for Nokia that it has turned to Russia, India, Latin America and the Philippines for increased sales, because that is where the opportunities are now," he pointed out.
Last year, about 400 million mobile phones were sold -- 37 percent of which bore the Nokia name -- a small increase over the 380 million sold in 2001. This year, like last year, the sector expects to sell 440 to 450 million handsets.
But that depends heavily on growth in mobile phone replacement sales -- currently the main driver, albeit sluggish, in the handset market. It has to heat up for Nokia to see increased sales in 2003.
"Nokia needs an accelerating replacement market, it really has to gain momentum if this should be a good year for Nokia or not," Vesola pointed out.
With the burst of the tech bubble and recent sluggishness in the mobile phone sector, analysts said Nokia had become more of a blue-chip company, steadily making its earnings targets by cutting costs and increasing its market share, than providing the growth of a "rocketing high-tech venture".
To keep its high-tech status with ditto growth possibilities, the Finnish giant is hoping its venture division, funding various high-tech start-ups and research programs, will provide the answer to its future.
"Nokia needs to come up with some new growth areas there. They might look minor at present. But really, I don't see the mobile phone and network businesses showing high growth figures any more," Vesola concluded.
Analysts expect Nokia on Thursday to announce fourth-quarter earnings per share of 0.23 euros, down one cent from the same period in 2001, while sales in the quarter are expected to clock in at 8.85 billion euros (9.43 billion dollars), up slightly from 8.79 billon a year earlier.
Nokia's share traded at 14.06 euros on the Helsinki stock market Tuesday, with analysts forecasting it would sell for around 18 euros by the end of 2003. |
