Nokia sees hammered by warning :: Namibia Internet Gateway cc ::

Articles: Nokia sees hammered by warning

Posted by admin on Friday, April 16, 2004 - 07:38 AM

HELSINKI (Reuters) - Mobile phone maker Nokia has warned of another tough quarter as cheaper, funkier phones from competitors have eaten into its market lead, sending its shares sharply lower.
Nokia NOK1V.HE , which makes more than one in three handsets sold globally, said on Friday second-quarter earnings would fall and sales could also drop. The outlook confirmed analysts' fears its patchy handset portfolio was struggling against rivals like U.S. Motorola and Korea's Samsung Electronics, which offer a broader line of medium-priced phones with colour screens and built-in cameras. Samsung earlier on Friday posted record earnings, said it expects its market share in January-March to have risen by almost four percentage points to 14 percent, and called for sales to continue rising in the second quarter. "It does not look good. It is obvious that they are losing market share on mobile phones, and the guidance indicates that next quarter will be worse than we expected," said analyst Urban Ekelund at Swedish market research group Redeye. "This is bad, there is no room for explanations ... The second quarter will be weakish and eyes are already on the second half," added analyst Jussi Hyoty at FIM Securities. Nokia said second-quarter earnings per share (EPS) would be between 0.13-0.15 euros (9-10 pence), well below the underlying figure of some 0.19 euros from a year ago and missing all expectations in a Reuters poll that called for an EPS of 0.18 euros. It said group sales would be flat to lower in the second quarter versus a fall of three percent forecast in the poll. Chief Executive Jorma Ollila said overall handset volumes in the quarter should be slightly higher. At 1:46 p.m. British time Nokia shares were off 7.25 percent at 12.53 euros, pulling the DJ Stoxx tech index .SX8P 2.3 percent into the red. The share earlier hit a 13-month low at 12.22 euros, and has underperformed the index by some 14 percent this year. But rivals Ericsson and Siemens both gained as investors saw a shift from the Finnish firm. "Most definitely now people are switching out of Nokia into Ericsson. Nokia is losing market share in the mid-market and Ericsson is a recovery story. People are placing their bets," said Chief Investment Officer Daniel Broby at BankInvest, who manages seven billion euros of funds. HOLE TRUTH Nokia posted January-March EPS of 0.17 euros, above an underlying 0.16 euros from a year ago and in line with a warning from April 6 that spooked investors as Nokia admitted it could not grow its profits quickly despite a booming market. The company has been hit by a hole in its handset portfolio, unable to offer mid-priced phones with the latest gadgets like colour screens and cameras. The gap that will not be filled until towards the end of the year. Nokia said mobile phone volumes grew by a heady 29 percent annually in the first quarter, but the company only increased shipments by 19 percent. The operating profit at its core mobile phones unit plunged by a quarter to 1.09 billion euros. "There were some changes in the products of our competitors, and we were not as swift in moving," Chief Executive Jorma Ollila told CNBC television. He earlier acknowledged Nokia was wrong not to embrace foldaway phone designs more quickly. The admission that its handset portfolio was not up to scratch is especially humiliating for Nokia, which for years prided itself on first identifying different segments within the market, and then setting the trend for many of them. 40 PERCENT STILL HOLDS In 2001, with Nokia's global market share approaching its 40 percent target, Ollila speculated it could exceed that goal. He reiterated the target on Friday despite the firm's market share falling to 35 percent in the quarter from 38 percent in the fourth quarter of 2003, but analysts said Nokia will now have to run harder just to stand still. "Nokia's main priority must now be to stabilise its market share by Q3 and hope that it can reverse the current decline in Q4," said Ben Wood at Gartner Dataquest. "In the face of aggressive competition from Motorola, Samsung, LG and Siemens this is going to be a challenging goal to achieve."

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