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

To: Eric L who wrote (2965)	4/18/2003 5:37:21 PM
From: Eric L	Respond to of 9255

Martyn Warwick on Both Nokia and Motorola Q1 >> Nokia Profits Down As Handsets Drive Sales Growth Martyn Warwick CommsDay 17/04/03 Nokia reported its Q1 results this morning. They show that although the company’s telecoms infrastructure products division continues to make large losses, they have been more than compensated for by increased sales of mobile handsets. The news that Nokia is not only holding on to market share in the toughest conditions ever in the mobile industry, but is actually increasing it cheered Stock Exchanges around the world and, in Helsinki, Nokia shares rose 4% to reach € 14.3. However, the gilt was taken off the gingerbread to some extent by the company’s revelation that profits throughout the group as a whole are down. Nonetheless, the handsets division turned in a remarkable performance. Sales were up one per cent to € 5.47 billion and profits up by nine per cent. This translates into an operating margin of 23.9% and rather more than industry analysts had been expecting. Nokia says it now has 38% of the world’s mobile market. The company says that overall the global mobile handset market will grow by 10% this year and that it will grow its own sales by more than that. Furthermore, Nokia is noticeably more bullish about prospects for the future than its closest (but still far distant rival), Motorola. Last week, Motorola forecast that mobile handset sales around the world would top out at 430 million this year. Nokia puts the figure at 440 million. Nokia also said that sales of mobile telecoms infrastructure equipment remain weak and accordingly adjusted its forecast for the market. The company was saying that the market would contract by 19% this year that has now been revised downwards to a 15% contraction. Looking to the future, Nokia indicated that its Q2 figures will be impacted by a likely €400 million restructuring and redundancies charge for the struggling infrastructure division. More than 1,800 jobs are to go there. The cautionary words from Nokia relating to the next set of quarterly figures is now becoming something of a habit and even an industry joke. How many times in the past couple of years has the company lowered analyst, investor and market expectations in its mid-quarter update only to beat those revised expectations on the day to general applause and increased share price? The question now must be, how long can this bizarre twist on ‘The boy who cried Wolf!’ continue before it becomes counter-productive and the market decides simply to disregard Nokia’s up, down, up quarterly switchback ride? << >> Motorola Meets Its Q1 Targets By A Hair’S Breadth Martyn Warwick CommsDay 16/04/03 Motorola, the wireless telecoms manufacturer has posted a wafer-thin first-quarter operating profit that just, by the skin of its teeth, keeps the company in line with its forecasts and more or less on line in its recovery programme. However, any unexpected shocks or further downturns in the market would soon knock the company off its precarious course. Motorola is the world’s second-biggest mobile handset manufacturer (behind Nokia) and recently suffered a two-year-long decline in its fortunes as the industry recession bit and markets for its products contracted. Today’s news though is the third consecutive quarter that the company has been able to report in increase in revenues and Motorola shares rose 6% last night in after hours trading in the US. However, the news of increased earnings is tempered by the fact that sales by Motorola continued to decline. Last night’s report from America shows that the company’s sales revenues were down by two per cent on the previous quarter. The company said that it would continue with its programme of cost-cutting and, announcing that the long hoped for recovery in the US mobile sector is still nowhere in sight, reduced its earnings forecast for the next quarter, Brian Modoff, a telecoms analyst at Deutsche Bank, said that the Motorola results (the company made a first quarter net profit of US$169 million on sales of $6.04 billion) were slightly better than the market had been expecting but are “no more than just OK”. Motorola’s chairman and CEO, Christopher Galvin, acknowledged trading in China, where the company has hitherto played very strongly, is getting tougher. Nonetheless, Mr. Galvin remained upbeat and said, “Once our markets begin to recover, we will be solidly positioned to take advantage of that rebound”. That’s fine but it’s also true of Motorola’s competitors, all of whom are playing slightly different versions of the same studiedly optimistic theme. That said, Motorola does have some real cause for hope. The company released 13 new handsets during Q1 and now claims to have upped its global market share from 16% to 19%. That’s still a long way behind Nokia, but a substantial improvement nevertheless. << - Eric -

To: Eric L who wrote (2965)	5/8/2003 6:45:39 PM
From: Eric L	Respond to of 9255

Lehman Brothers Nokia Update Tim Luke Lehman Brothers Nokia Company Update Update On Meetings With Mgmt (Excerpts) ... Yesterday, we hosted a meeting with Nokia management in New York including Matti Alahuhta President Nokia Mobile Phones. Our estimates and 2EW rating remained unchanged. In general, management reiterated many of the core themes from the recent 2Q03 earnings call. While no new initiatives were unveiled management's tone was broadly constructive with a focus on a series of new product launches potentially balancing subdued macro economic trends in several key regions. From a regional perspective, management reiterated a constructive outlook in the US market helped by carrier marketing activities with Nokia launching 17 new phones so far in 2003. CDMA remains a key focus and we believe NOKIA may be targeting to penetrate Verizon (as well as India) by the end of 3Q03. At the same time, we believe Europe may be seeing generally solid trends with new product initiatives potentially helping to offset the continuation of a subdued macro backdrop in much of Europe. Our monthly GfK updates have shown NOK's steady increases to over 49% share in the region in February up from 41% last year with new numbers for March due for Wednesday. Management suggested that while there have been some changes in handset subsidy levels in Europe these changes have not been significant, with some of the recent changes in pricing at the lower end of the European market being more tactical than substantial. With respect to China and Asia management noted that its guidance for 2Q03 had already reflected some impact from SARS. Clearly, however, SARS does appear to represent an area of additional uncertainty. We note that China represented just under 10% of total handset revenues in CY02 and Asia being about 25%. We aim to continue to monitor the SARS outlook and potential impact on consumer end demand with Nokia management noting that it had not seen any disruption to its production and sourcing chain as yet. Management did suggest that some additional orders of supplies may have been placed to ensure availability of parts. Separately, management emphasized the core elements of imaging, business applications and media/games as major long-term growth drivers for the handset market. Nokia confirms 22 MMS phones which are currently available globally, as well as 27 models with color and 36 phones with JAVA. With respect to Europe, management went on to reiterate that it does expect to see a meaningful acceleration in the transition to color and camera phones in Europe in 2H03. In the N.A. market, management also suggested the introduction of push to talk would likely be unveiled in 2004. We recognize that it is still early in 2Q03 with only one month completed and ahead of Nokia's mid-quarter update on June 10th, our estimates are currently unchanged. Our estimates for 2Q03 remain at EUR 7.2 billion in sales up 4% YoY and 6.5% QoQ with EPS of EUR 0.19/$0.20. We are currently modeling the phone business up 6% sequentially and 8% year over year to EUR5.82 billion versus guidance of up 4% to 12% YoY with flattish operating margins of 23.4%. For the full year we are using EUR 30.4B +1% with EPS of EUR0.88/$0.82. Our CY04 estimates remain EUR 0.89/$0.95. Following the shares strong recent appreciation, while we continue to be encouraged by Nokia's strong execution and its impressive longer-term positioning, at present we maintain our 2-EW rating on what remains a preferred pick in a highly competitive handset market. Our price target currently remains $17 or 19 to 20x CY03 earnings estimates pending some strengthening of visibility. Longer -Term Growth Focus Areas In meetings with investors this week, Nokia continues to highlight emerging growth opportunities in the enterprise arena, as well as within the imaging and gaming markets. Within the enterprise arena, Nokia continues to expand its offerings from the original 9200 Communicator product suite to most recently its expanding keyboard, color screen 6800 platform. In the imaging arena, Nokia confirms 22 MMS phones which are currently available in the market, as well as 27 models with color and 36 phones with JAVA. GAMING: In the gaming arena, Nokia's high profile N-Gage platform is expected to become commercially available in 4Q03 & we believe Nokia may provide some additional color around its gaming initiatives at the E3, Electronic Entertainment Expo, later this month (May 13-15) in Los Angeles which previews the latest in game development globally. We are pleased to confirm that Nokia's General Manager for the New Entertainment Unit in charge of the new N-Gage platform, Nada Usina, will be speaking at the Lehman Brothers wireless conference on May 19th and 20th. Nokia will then be hosting its annual analysts day in Helsinki on June 11th. 2Q03 GUIDANCE ------------------------------------------------------------------ * Nokia Mobile Phones sales in June up 4-12% year over year. Total Group sales up less than that range. * June tax rate slightly higher than 30%, June EPS EUR0.13-0.16 (ex infrastructure restructuring charge of EUR0.05- 0.06, June EPS range EUR0.18-0.22) * Mobile phone market size to grow 10% in 2003 from the 2002 base of 405 million phones, down from previous estimate of “10% or slightly higher”. ASPs to be flat to higher. * Infrastructure Market to trend down 15% or more in 2003. Nokia Networks sales to decline in line with broader market Vs previous estimate of 5-10% decline. -------------------------------------------------------------- Lehman Brothers Estimates: (in B Euro) · June 2Q03 2003 -------------------------------------------------------------- Group revenues 7.2 (+6.5% QoQ; +4% YoY) 30.4 (+1%) Mobile Phones 5.8 (+6% QoQ; +8% YoY) 24.7 (+6%) Infra 1.3 (+9% QoQ; -10% YoY) 5.5 (-16.3%) Group margins 17.6% 18.0% Mobile Phone margins 23.4% 23.4% Infra margins - 3.0% - 2.5% EPS EUR 0.19 0.82 EPS $ 0.20 0.88 STOCK OPINION: Maintain 2-Equal weight on Leading Player In a Tough Macro Environment. In general, we believe that Nokia remains well positioned for the longer term as a leading player in the challenging wireless handset and infrastructure markets. Following the shares strong recent appreciation, while we continue to be encouraged by Nokia's strong execution and its impressive longer-term positioning, at present we maintain our 2-EW rating on what remains a preferred pick in a highly competitive handset market. Our price target currently remains $17 or 19 to 20x CY03 earnings estimates pending some strengthening of visibility. << - Eric -