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Technology Stocks : Nokia (NOK) -- Ignore unavailable to you. Want to Upgrade?

To: Eric L who wrote (8819)	1/13/2001 12:40:43 PM
From: Eric L	Read Replies (1) \| Respond to of 34857

>> Handsets’ Star Status Margo Mcall Wireless Week January 15, 2001 Whichever manufacturer’s figure you use, one thing is certain: There were a lot of wireless handsets sold in 2000. But what inquiring minds want to know is this: How many handsets will be sold in the coming year? Investors badly want an answer to that burning question, particularly as economic uncertainty builds. Like paparazzi salivating for the mere glimpse of a star, investors are pouncing on any number that comes out. They pummeled Wall Street darling Nokia and other manufacturers last week after the No. 1 phone maker reported estimates that 405 million handsets were sold worldwide in 2000, nearly double the volume in 1999. Because that number was below some analysts’ estimates, investors concluded that wireless phone sales are losing their luster. What they failed to notice is that Nokia’s estimate surpasses its original 2000 projection for worldwide sales of 400 million phones, as well as other analysts’ more conservative global sales figures. Investors also ignored Nokia’s own astonishing box-office draw. The market leader sold 128 million phones, 64 percent more than the 78.5 million sold in 1999. Motorola held the spotlight when delivering its fourth-quarter earnings, which at $335 million offered a 41 percent decline from $564 million a year ago and earnings per share of 15 cents, compared with 25 cents a year ago. The No. 2 phone maker continues to struggle. Fourth-quarter 2000 sales were $10.1 billion, a respectable 11 percent increase over the $9 billion reported in the fourth quarter of 1999, and 2000 sales rose to $37.5 billion, compared with $32 billion in 1999. But fourth-quarter sales in the handset division were flat, and profits decreased 69 percent, to $76 million, down from the year-ago level of $242 million. The company expects sales of $8.8 billion in the first quarter, and earnings of 12 cents per share. But executives declined to offer any further guidance on 2001 results. The results were, however, in keeping with analyst estimates that were revised following Motorola’s two earnings warnings, and the company was rewarded by a drive up in its share value. Despite its own flat handset sales, Motorola set the 2000 global handset sales figure at 410 million, a bit more than Nokia’s projections. The company did warn, though, that 2001 global sales are expected to come in at the low end of its original estimates of 525 million to 575 million. At least one analyst firm - Credit Suisse First Boston - also lowered its estimate to the low end of that range. However, a clearer picture won’t be offered until Nokia and Ericsson weigh in on 2001. Nokia, which reports earnings Jan. 30, estimated back in the third quarter that 550 million handsets would be sold this year. Despite concerns of slowing growth, it appears handset sales will remain on the A-list due to the sheer number of users. Nokia estimates 700 million current wireless phone users worldwide, with 1 billion expected by the end of 2002. Motorola calculates that replacement phones will account for 44 percent to 46 percent of the future handset market. So far, troubles in the handset industry are being attributed to individual manufacturers, rather than the industry’s declining celebrity status. Motorola and No. 3 handset maker Ericsson were both slow to roll out attractive lower-cost phones - allowing Nokia to gobble up market share - and now are paying dearly by streamlining their product portfolios. Discontinuing older phones and revamping its manufacturing process cost Motorola $68 million in the fourth quarter, and caused a 13 percent drop in its phone prices. Mike Zafirovski, newly named president of the personal communications division, says engineers were putting efforts into too many products. "We were probably unprepared for the explosion of low-end phones six to nine months ago," he acknowledged during last week’s conference call. With a new management team, product line and manufacturing process in place, Zafirovski expects improved results by the second half of this year. This isn’t the first time Motorola has been caught off-guard by market changes. Motorola was relegated from leading actor to character roles after its slow transition from analog to digital. Bryan Prohm, a wireless equipment analyst with Dataquest, says Motorola and Ericsson both failed to notice that carriers were starting to carry only four or five different models of wireless phones, instead of a dozen or more. "Both Motorola and Ericsson have been using a ‘Let’s try this again’ strategy for the last few years," Prohm says. "That’s why Nokia has managed to gain market share." As of the third quarter, Nokia held twice the market share of Motorola and three times that of Ericsson. But young and upcoming phone makers - including Siemens, Panasonic and Samsung - are struggling to ascend from bit players with less than 6 percent market share to rising stars. The move to general packet radio services could give some of those players a chance to challenge Nokia’s current market domination. << - Eric -