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

To: Eric L who wrote (2232)11/27/2002 10:50:50 AM
From: Eric L  Read Replies (3) | Respond to of 9255
 
re: Cash Hoards (Wireless) and the Share Buyback Option.

This article specifically discusses Nokia in relationship to how rating agencies view but could apply to any business that is not capial outlay intensive and that is generating significant cash. Qualcomm would be an example.

>> Nokia Cash Pile Is An Important Asset - Moody's

Stockholm
Dow Jones
November 27, 2002

biz.yahoo.com

Moody's Investors Service wouldn't look favorably on any move by Nokia Corp. to whittle down its substantial cash pile by buying back shares, a senior analyst for the rating agency said Wednesday.

Nokia's EUR8 billion in cash gives it valuable flexibility to respond to the maturation of the mobile phone market and growing challenges from Asian handset makers, as well as to possibly expand its networks business into new areas, Moody's Senior Vice President Wolfgang Draack said at a workshop here.

Draack is Moody's senior analyst for European telecom equipment makers.

Nokia Chief Executive Jorma Ollila, who has described the company's cash pile as "excessive," said this month that the world's largest maker of mobile phones is exploring returning cash to shareholders by buying back stock, but is wary of risking a downgrade to its credit rating.

"The rating agencies are very conservative," Ollila said three weeks ago at a conference in Spain. "We don't want the negative cycle of a potential cut in our credit rating."

Moody's currently has an A1 rating on Nokia, but has put the rating on negative outlook, meaning there is a bias toward a downgrade.

In a research note Wednesday, CSFB predicted that Nokia's cash pile would rise to EUR12 billion by next year, and said it considers a share buyback increasingly likely.

Asked directly Wednesday if Moody's would downgrade Nokia's ratings if the company paid a special dividend or began buying back shares, Draack responded: " We have a negative outlook on those ratings. And cash is very important in our analysis of those ratings."

Draack said the cash pile could give Nokia the flexibility to extend its network systems business into CDMA2000, the rival 3G standard to WCDMA, which Nokia helped develop and so far has concentrated solely upon. Nokia's networks unit generates about 20% of its sales.

Nokia has projected that WCDMA will eventually serve at least 80% of 3G subscribers. But WCDMA has stumbled out of the blocks, while CDMA2000 is off to a stronger start in Asia, leading some analysts to speculate that CDMA2000's share of the market could grow.

"You can't yet assume that WCDMA will be the dominant standard in the world," Draack said. "There is at least a challenge coming from CDMA2000. The question is how Nokia will deal with that."

To get into CDMA2000, Nokia would probably have to find a partner rather than build the business on its own, Draack said. Even then, the profit margins would probably be lower than for its current network business, he said.

Nokia's position in the Global System for Mobile Communications and WCDMA network market is "very, very strong," Draack said. "But they may feel it worthwhile to enrich the product range."

Draack said Moody's believes the telecom equipment market hasn't yet hit bottom. It is modeling its ratings on an expectation that the decline in demand from operators will slow early in 2003, and the market will stabilize in the second half of the year.

In response to a question, he said Moody's believes that it is important for Telefon AB LM Ericsson's core networks business that the company maintains a presence in the mobile phone market. Sony Ericsson, the joint venture that Ericsson and Sony Corp. formed last year by combining their respective phone operations, has been losing both market share and money.

Some analysts believe Ericsson should abandon the market, but the Swedish company said this week that it plans to provide more money to Sony Ericsson early next year. <<

- Eric -



To: Eric L who wrote (2232)11/27/2002 4:36:30 PM
From: Eric L  Read Replies (1) | Respond to of 9255
 
The Handset Market Share Game

• The mobile wireless handset market is the largest consumer electronics market in the world, both in terms of units sold and total value.

• In 2002 ~415 million units valued at ~$62 Billion will ship.

• Nokia is King of this space and its 2 principle challengers are Motorola & Samsung.

• Below is an abstract of historical and current vendor market share and unit shipments through Q3 2002.

- Unless otherwise noted all reported numbers in this abstract are from Gartner Dataquest.

- Ericsson sales only in 2001 and prior years with Sony sales included in others for those years. From beginning of 2002 Sony Ericsson combined sales reported.

I. Handset Market Share by Manufacturer
                                                                 ·
 A. Year to Year Market Share
                                                                 ·
                                              YTD
           1997   1998   1999   2000   2001   2002
                                                                 ·
Nokia      20.1%  24.3%  26.9%  30.6%  35.0%  35.4%
Motorola   28.8   23.2   16.9%  14.6%  14.8%  15.2%
Samsung     3.6    4.2    6.2%   5.0%   7.1%   9.9%
Siemens     2.5    3.3    4.6%   6.5%   7.4%   8.3%
Ericsson   16.2   14.4   10.5%  10.0%   6.7%   5.5%
Matsushita  5.7    8.1    5.5%   5.2%   4.1%    ?
                                                                 ·
Sources for above statistics: Herschel Shostek for 1997
and 1998 and Gartner Dataquest for 1999 through 2002.
                                                                 ·
 B. 2002 Market Share by Quarter and YTD
                                                                 ·
            2001    1Q 02    2Q 02     3Q 02   YTD 02
           Market   Market   Market    Market  Market
           Share %  Share %  Share %  Share %  Share %
                                                                 ·
Nokia       35.0%    34.7%    35.6%    35.9%    35.4%
Motorola    14.8%    15.5%    15.7%    14.4%    15.2%
Samsung      7.1%     9.6%     9.5%    10.6%     9.9%
Siemens      7.4%     8.8%     8.4%     8.4%     8.3%
S Ericsson   6.7%     6.4%     5.4%     4.8%     5.5%
Others       29.0%    25.0%    25.6%     26.4%   25.7%
Total       100.0%   100.0%   100.0%    100.0%  100.0%
                                                                 ·
 C. Quarter by Quarter Market Share for 2000 & 2001
                                                                 ·
         Q100   Q200   Q300   Q400   Q101   Q201   Q301   Q401
                                                                 ·
Nokia    27.9%  27.5%  30.6%  33.9%  35.3%  34.8%  33.4%  36.1%
Motorola 16.0%  15.6%  13.3%  12.7%  13.2%  14.8%  15.7%  15.5%
Siemens   5.5%   5.5%   8.6%   6.9%   6.9%   7.9%   7.2%   7.9%
Samsung    -     5.5%    -      -     4.8%   6.8%   7.5%   7.4%
Ericsson 11.5%  10.3%   9.7%   8.7%   6.8%   8.3%   8.0%   4.7%
                                                                 ·
 D. Nokia Market Share Year to Year
                                                                 ·
  %  1997   1998   1999   2000   2001   2002

 36                                 __/
 35                               /
 34                             /
 33                           /
 32                         /
 31                       /
 30                     /
 29                   /
 28                 /
 27               /
 26             /
 25           /
 24         /
 23       /
 22     /
 21   /
 20 /
                                                                 ·
 E. Nokia Market Share v. Next Nearest Competitor
                                                                 ·
            1997   1998   1999   2000   2001   2002
                                                                 ·
Nokia       .7x    1.05x  1.6x   2.1x   2.4x   2.3x
Motorola   1.4x     .95x   .6x   .48x   .42x   .43x
                                                                 ·
 F. Nokia Market Share v. Their Leading Asian Competitor
                                                                 ·
            1997   1998   1999   2000   2001   2002
                                                                 ·
Nokia      3.5x    3.0x   4.4x   5.9x   4.9x   3.6x
Samsung      na      na   .30x     na    .20   .28x
Matsushita .28x    .33x     na   .17x     na     na
                                                                 ·
 G. Nokia v. Samsung - 5 Year Market Share Increase:
                                                                 ·
      Nokia                Samsung
                                                                 ·
 1998 + 4.2 % points      .6 % points
 1999 + 2.6 % points     2.0 % points
 2000 + 3.7 % points   - 1.2 % points
 2001 + 4.4 % points     2.1 % points
 2002 +  .4 % points   + 2.8 % points
      --------------    -------------
      + 15.3 % points   + 6.3 % points
                                                                 .
Like Nokia, Samsung manufactures GSM, CDMA & TDMA handsets.
In Q2 02 their product mix was GSM @ 59%, CDMA @ 36%, TDMA @ 5%
                                                                 ·
II. Handset Unit Sales
                                                                 ·
 A. 2002 Handset Unit Shipments (thousands) by Quarter

           1Q 02    2Q 02    3Q 02    YTD 02     YTD
           Sales    Sales    Sales    Sales     Share
                                                                 ·
Nokia      32,531   35,089   37,447  105,067    35.4%
Motorola   14,533   15,496   15,030   45,059    15.2%
Samsung     9,030    9,342   11,063   29,435     9.9%
Siemens     8,229    8,247    8,145   24,621     8.3%
S Ericsson  6,009    5,309    4,999   16,317     5.5%
Others     23,424   25,220   27,572   76,216    25.7%
Total      93,755   98,703  104,256  296,714   100.0%
                                                                 ·
 B. 2001 Handset Unit Shipments (millions) by Quarter
                                                                 ·
                                               Market
             1Q01  2Q01   3Q01   Q401   Total Share YE
                                                                 ·
Nokia        34.0  31.27  31.55  42.88  139.7   35.0%
Motorola     12.7  13.29  14.77  18.34   59.1   14.8%
Siemens       6.6   7.06   6.77   9.37   29.8    7.4%
Samsung       6.1   6.19   7.11   8.80   28.2    7.1%
Ericsson      6.5   7.41   7.53   5.56   27.0    6.7%
Others       30.8  24.58  26.67  33.75  115.8   29.0%
                                                                 ·
Total        96.7  89.80  94.40 118.70  399.6  100.0%
                                                                 ·
 C. 2000 v. 1999 Handset Unit Shipments (millions) & Share
                                                                 ·
           2000    2000 Market    1999    1999 Market  Growth
         Shipments  Share (%)    Shipmnts  Share (%)    (%)
                                                                 .
Nokia     126,369    30.6        76,335      26.9      65.5
Motorola   60,094    14.6        47,818      16.9      25.7
Ericsson   41,467    10.0        29,785      10.5      39.2
Siemens    26,989     6.5        12,982       4.6     107.9
Panasonic  21,511     5.2        15,581       5.5      38.1
Samsung    20,639     5.0        17,687       6.2      16.7
Others    115,662    28.0        83,393      29.4      38.7
Total     412,731   100.0        283,581     100.0     45.5
                                                                 ·
 D. Total Handset Shipments By Year (millions)
                                                                 .
 1999    2000    2001    2002E
                                                                 ·
 283.6   412.7   399.6   415m
                                                                 ·
IV. The Power of Brand
                                                                 ·
A. The World's Most Valuable Brands (Interbrand)
                                                                 ·
Rank   Brand               2002 Brand Asset
                           Value ($Billions)
                                                                 ·
1.      Coca-Cola                69.6
2.      Microsoft                64.1
3.      IBM                      51.2
4.      GE                       41.3
5.      Intel                    30.9
6.      Nokia                    30.0
                                                                 ·
Other Comm Equipment Brands in the Top 100
                                                                 ·
21.     Sony                     13.9
34.     Samsung                   8.3
71.     Ericsson                  3.6
74.     Motorola                  3.4
81.     Panasonic (Matsushita)    3.1
                                                                 ·
V. Nokia Revenue & Profitability
                                                                 ·
   • All figures are EUR (million) and 1 EUR = 0.990041 USD
   
   • All figures are Reported IAS not Pro Forma IAS which
     excludes goodwill amortization and non-recurring items.
                                                                 ·
                                         9 Mos.
                               2001      YTD 02   TTM
                                                                 ·
 A. Nokia Corporation
                                                                 ·
  - Net Sales                  31,191    21,173   30,542
  - Operating 
    Profit                      3,362     3,314
  - Operating 
    Margin (%)                  10.8%     15.7%
  - Net Profit                  2,200     2,335 
  - Net Margin (%)                 7%     11.0%     9.5%
                                                                 ·
 B. Nokia Mobile Phones (Only)
                                                                 ·
  - Net Sales                  23,158    16,469
  - Operating 
    Profit                      4,521     3,559
  - Operating 
    Margin (%)                  19.5%     21.6%
                                                                 ·
###


- Eric -


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