Nokia lifts earnings, sales guidance
Volumes, Western Europe mix are better than forecast
By Steve Goldstein, MarketWatch
Last Update: 10:50 AM ET Sept. 13, 2005
LONDON (MarketWatch) -- Nokia, the world's top seller of mobile phones, Tuesday lifted third-quarter earnings and sales guidance due to stronger-than-expected mobile phone sales volumes, with a bigger proportion of its phone sales coming from Western Europe than the company originally expected.
Nokia (NOK: news, chart, profile) , in an unscheduled announcement, now sees third-quarter earnings between 0.18 euros and 0.19 euros a share on revenue between 8.4 billion and 8.5 billion euros ($10.3 billion to $10.4 billion).
The new earnings guidance also includes the impact of selling off its professional mobile radio division to EADS (FR:005730: news, chart, profile) as well as some Finland real estate, which will lift earnings by 0.01 euros or slightly more per share.
It previously saw earnings between 0.14 euros and 0.17 euros a share on revenue between 7.9 billion and 8.2 billion euros.
Analysts polled by Thomson First Call were predicting earnings of 0.17 euros on revenue of 8.03 billion euros.
U.S.-listed Nokia shares rose 4.2%, or 67 cents, to $16.74 in New York trade.
Nokia's chief financial officer, Rick Simonson, said on a conference call that a slight shift in mobile phone sales to Europe and away from Latin America helped stem the reduction in average selling prices.
At Phones 4u, a U.K.-based phone retailer, top-selling phones from the company included the Nokia 8800, a high-end fashion phone, and the Nokia 6230i, a mid-range phone with a camera and MP3 music player built in.
U.S. and Asian-Pacific sales were as expected, Simonson said.
Firm pricing a factor
Nokia said its "relatively firm pricing" has also stemmed the decline in average selling prices. Nokia's average selling price in the second quarter was 105 euros ($129) compared with 110 euros in the first quarter.
Simonson said gross margins are still on track to fall, though they have fallen "a little less than what we had predicted."
Nokia has been cutting back on sales and marketing, as well as research and development, in the third quarter to limit the margin decline.
UBS told clients it's key that Nokia continue to improve margins later in the year.
"With the third-quarter update giving some relief on the trend in device margins, further improvement in the fourth quarter will prove critical for the stock," the broker said.
Neil Mawston, an associate director in the global wireless practice of Strategy Analytics, said he wasn't too surprised by the increased guidance, given the recent improved view from chipmaker Texas Instruments (TXN: news, chart, profile) as well as emerging market trends.
He said Nokia and Motorola (MOT: news, chart, profile) , which both grew faster than the broader market in the second quarter, may be doing so again in the third. Nokia said in lifting its guidance that it was indeed outgrowing the broader market.
The candy bar rules
Motorola sales, meanwhile, have been helped by the popular Razr V3 mobile-phone model. Motorola shares rose 27 cents to $23.11 on Tuesday.
Nokia had 32.3% of the mobile phone market in the second quarter, with Motorola the runner up at 18%, according to the consultant's figures.
Nokia was heavily criticized last year for not producing enough "clamshells," or phones with screens that flip open, and instead relying on candy-bar shaped phones.
"The whole clamshell theme was overhyped in 2004. It's the low end that's driving growth and that's where the candy bar rules," Mawston said.
The Finnish-based company said its networks division is performing as expected.
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