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

To: H.A.M. who wrote (1474)	2/5/1999 12:52:00 AM
From: H.A.M.	Respond to of 34857

Nokia Set For Calmer '99; Ericsson May Offer More Potential By ROD STONE Dow Jones Newswires February 4, 1999 STOCKHOLM -- The performance of Oy Nokia (NOKA) shares this year is unlikely to match the dizzy heights of 1998 and Nordic rival Telefon AB LM Ericsson (ERICY) may offer investors richer pickings in the second half. Telecom analysts said Nokia faces stiffer competition in the mobile phone market as the likes of Ericsson launch new handsets. Finland-based Nokia isn't expected to repeat its exceptional 1998 - when pretax profit rose 74% and shares surged 260% - and Ericsson shares could have better upside potential, they said. Lars Soederfjell, analyst with Myrberg & Partners in Stockholm, said Ericsson shares' stronger performance since the release of 1998 earnings may reflect changing expectations among investors. "When people saw Nokia's earnings some thought this might be as good as it gets," he said. Anita Farrell, telecoms analyst with Merrill Lynch in London, said Nokia capitalized on a lack of serious competitors for its new mobile handsets in 1998. Ericsson was stuck with older products and held back by its underperforming fixed network Infocom division, she said. "Nokia had all its guns firing in one direction during 1998. ... Nokia still has the momentum going forward but is unlikely to have as sweet a year in 1999 as it had in 1998," said Farrell. She said the momentum may turn in the second half toward Ericsson if the public gives the thumbs up to its new slim-line T-28 handset. Underlining its dominance in the mobile handset market, Nokia shares traded in Stockholm surged around 260% in 1998, while Ericsson's shares posted a more sedate 29% rise. Since last Thursday, though, when Ericsson posted a 6% rise in its 1998 pretax profit to SEK18.21 billion, the Swedish company's shares have outpaced their Finnish rival. Ericsson shares closed Wednesday at SEK220, just more than 14% up on a week earlier, while Nokia shares ended at SEK1072, a 6.8% fall on the close last Thursday. Last Friday Nokia reported at 74% rise in pretax profit to FIM14.60 billion. (EUR1=FIM5.94573). Analysts said Nokia shares have been the victim of their own success and profit takers have been quick to pull funds out. Some market players unofficially had higher expectations for Nokia, which posted profits roughly in line with market forecasts. "Expectations for Nokia have been so high and that is what that market is seeing right now," said a Stockholm analyst who asked not to be named. He said some investors feel Nokia - which generates 60% of sales from mobile phone products compared with Ericsson's 21% - is more exposed to pricing pressures this year on the handset market. The analyst said Ericsson faced greater mobile phone pricing pressures than Nokia last year as it sought to retain market share by cutting prices. It didn't have the benefit of new models, he said. "I see a lot of upside potential for Ericsson in 1999. They have had the restructuring and the Infocom division that's been losing money appears to have reached a plateau," he said, adding that the new handset will be Ericsson's key weapon this year. Farrell of Merrill Lynch said she expects both Nokia and Ericsson to maintain their respective share in the mobile handset market and the tougher competition will hit second-tier players a lot harder. She said Nokia's higher research and development spending will also hurt its margins this year, but she isn't unduly alarmed. Nokia said last week it still expects to achieve its ambitious aim of increasing sales 25% to 35% in 1999. Ericsson officials said in London Wednesday they don't expect its new handset to have a significant impact on earnings until the fourth quarter. The company also said it's concerned over customer financing in China, its largest market, accounting for 12% of sales. The T-28 handset, which Ericsson Chief Executive Sven-Christer Nilsson unveiled last Thursday, has generally met with a favorable reaction among analysts and telecoms professionals. "It's got a much better man-machine interface and it continues the Ericsson brand image," said a telecoms professional in the U.K. who asked not to be named. "I'm impressed by the phone's icon driven menu system and it seems a lot more intuitive than the old Ericssons," he said. Although not unique, the dual-band phone can work between the GSM 900 (global system for mobile communication) and GSM 1800 networks. "The product is good but that's what you'd expect from Ericsson," said Farrell. "A lot depends on what consumers make of it." -By Rod Stone; 46 8 545-13094; rstone@ap.org