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To: Johnny Canuck who wrote (39876)	7/10/2003 1:15:03 PM
From: Johnny Canuck	Read Replies (1) \| Respond to of 71926

Nokia Profits to Slump, Outlook Seen Cautious 7/10/03 8:41 AM Source: Reuters By Brett Young HELSINKI (Reuters) - The world's largest mobile phone maker Nokia is set to give a cautious outlook when it reports a drop in second-quarter earnings next week, as tough conditions in China temper signs of improvement in the U.S. Analysts said that after the Finnish firm gave two trading statements in June, they would zero in on its outlook, particularly for the handset unit, which generates all of the firm's profits and 80 percent of total sales. "All eyes are now on Nokia's guidance and what will be said about the coming quarters. It is interesting to see how optimistic they will be," said Nordea Securities analyst Jussi Uskola, who rates Nokia shares at "buy." "The company will be cautious on top-line (sales) growth but more bullish on the bottom line," he said. Nokia has repeatedly backtracked on its sales goals in recent quarters, hit by the struggling global economy and local factors such as the spread of the SARS virus in Asia. But thanks to its massive size -- it makes roughly two out of every five mobile phones sold globally -- Nokia can reap economies of scale, putting pressure on its suppliers to keep prices low and giving it the best profit margins in the industry. Nokia warned in June that sales growth at Nokia Mobile Phones may fall below four percent in the second quarter and that group earnings minus goodwill amortization and non-recurring items may stay within a previously given range of 0.13-0.16 euros per share. A Reuters poll of analysts reflects this, with handset sales seen up 3.6 percent year-on-year at 5.59 billion euros ($6.35 billion), and EPS at 0.14 euros versus 0.19 euros a year ago, hit by a one-off charge at the firm's struggling Networks unit. Analysts said that should the numbers meet expectations, any share gains would be limited, with the stock already up over 10 percent in less than a week thanks largely to improving sentiment on Wall Street. For the year the stock has added five percent but has underperformed the Dow Jones Stoxx Tech index by 11 percent. Nokia's results come in a busy week for tech reporting, sandwiched between earnings from Netherlands-based Philips on July 15 and Sweden's Ericsson on July 18. U.S. LOOKING GOOD, CHINA REMAINS TOUGH Analysts said they wanted confirmation the company was winning handset market share in the United States, its second-largest market behind Europe. Nokia struggled in the U.S. market at the start of the year, losing market share to rivals including U.S. Motorola due to a weak handset portfolio, but has vowed to gain back lost ground and has since released several new models. But analysts do not expect the cut-throat conditions in China, the world's largest mobile phone market by unit sales, to improve. There handset makers have been plagued by unsold inventories that depress prices and by rising competition from domestic Chinese players. Nokia is trying to offset the pain by boosting its local production of handsets running on CDMA, or code division multiple access, a transmission standard popular in the United States and in several large Asian countries. "The fact is that Nokia is not that competitive in China with their handset portfolio, especially at the low end of the market," said Carnegie analyst Mika Paloranta. E-mail story \| Printer-friendly version \| Send us news tips