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To: The Reaper who wrote (125805)	12/2/2002 9:25:45 AM
From: engineer	Read Replies (1) \| Respond to of 152472

12/01 19:39 Nokia May Be Too Upbeat for Mobile-Phone Outlook, Investors Say By Ville Heiskanen Espoo, Finland, Dec. 2 (Bloomberg) -- Nokia Oyj may be too upbeat about the outlook for next year even after the world's largest mobile-phone maker lowered its forecast for global handset sales seven times since the beginning of 2001, investors said. Finland's biggest company has indicated it expects the phone market to grow 10 percent to 15 percent in 2003 from its estimate for 400 million handsets this year. Nokia will probably affirm the forecast, equal to 440 million to 460 million mobile phones, in a meeting with investors in Dallas tomorrow, analysts said. ``I'm skeptical about their growth estimate,'' said Ville Ahoranta, who helps manage 275 million euros ($273 million) in shares, including Nokia's, at LEL Employment Pension Fund. ``It's a blue-sky scenario. We have no evidence of a mass-market adoption of the latest models.'' Nokia's shares have fallen a third this year, wiping about 40 billion euros from its market value, on concern new phones with color screens and cameras won't lure people into replacing their old phones as often and as soon as Nokia expects. Nokia, once Europe's most valuable company, has seen its market value drop to about $93 billion from more than $300 billion in 2000. Shares of the Espoo-based company are held by funds including Texas Teacher Retirement System and those managed by Schroders Plc and Janus Capital Management. Getting the market right is key for Chief Executive Officer Jorma Ollila in deciding how to allocate resources, investors said. Nokia's 2001 profit fell 44 percent on higher costs. Over Optimistic? In 2001, mobile-phone sales declined for the first time in the industry's 22-year history. This year, Nokia expects global sales to rise 5 percent. Nokia has cut its 2002 outlook twice by a total of 10 percent after cutting 2001 forecasts five times. Nokia's 2003 prediction, if confirmed, is more optimistic than rival Samsung Electronics Co., whose sales rose faster than the other top five mobile-phone makers in the third quarter. The Korean company expects 435 million phones to be sold next year. Market researcher Gartner Inc. expects 420 million handsets to be sold in 2003 and Credit Suisse First Boston predicts 436 million cellular phones. Nikko Salomon Smith Barney's outlook is for 415 million phones. Nokia's expansion of its product range may help it gain a bigger slice of that market, some investors said. CSFB analysts predict Nokia's share will grow to 38.9 percent in 2003. Gaining Market Share While rivals such as Siemens AG and Sony Ericsson are focused on paring losses, the 137-year-old former rubber goods maker accounted for more than half of mobile-phone sales in Europe for the first time ever in the third quarter, according to Gartner. ``Nokia's product portfolio is superior,'' said Sami Sormunen, who helps manage about 500 million euros at Pohjola Fund Management Co. Nokia and rivals may find that growth can only be achieved by reducing phone prices, investors said. Analysts at Credit Suisse First Boston predict a 5 percent drop in average phone prices next year to $205. That jeopardizes Nokia's forecast for at least 10 percent growth in revenue next year, investors said. Nokia and rivals are increasingly relying on replacement sales because seven out of 10 Europeans and more than half the population of the U.S. already own mobile phones. Users currently change their handsets every two and half years, a period of time Nokia and its rivals are trying to shorten. `Precipitous Drop' Interest for replacement phones in the U.S., Europe and South Korea had a record drop in October, according to a Nov. 21 note by Wachovia Securities analysts. ``Overall demand appears to have dropped as precipitously as it did this time last year which presaged a weaker-than-expected Christmas selling season,'' the analysts wrote in the note. Nokia has introduced more than 30 phones this year, compared with 14 last year, to spur replacement sales. Its sales rose for the first time in 15 months in the third quarter, edging up 2 percent. Nokia brought out a handset with a built-in camera in June and for months was the only company in Europe to have such a product. This month it will begin selling a lower-priced color- screen phone that lets users send picture messages and is expected to have no real competition for months, analysts such as Opstock Securities' Michael Schroeder say. Nokia has been cutting costs to remain profitable even as growth slowed. It has eliminated 10 percent of its workforce, negotiated lower prices for parts and saved by introducing new phones based on older products' platforms. Nokia is rated A1 by Moody's and A by Standard & Poor's, higher than rivals Motorola, Ericsson and Samsung Electronics Co., according to Bloomberg data. Nokia's profit more than tripled to 610 million euros and its cash pile swelled to 8 billion euros in the third quarter, prompting speculation the company may buy back some of its own stock. Ollila, who hinted at an investor meeting in Barcelona last month that a buyback is possible, is expected to address the issue at Dallas. ``A buyback would be the most obvious use for some of that cash,'' Sormunen said. ``For a problem, this is quite a pleasant one.'' (See nokia.com for a Webcast of Nokia's meeting with investors, which starts at 8:00 a.m. Dallas time on Tuesday, Dec. 3.)