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Nokia warns sales lack sparkle
HELSINKI, Finland (CNN) -- Nokia, the powerhouse behind the global mobile phone revolution, warned sales would be weaker than expected in the fourth quarter as new handset models fail to galvanize consumers. Nokia and its rivals -- like Sony Ericsson, Motorola and Samsung -- have been betting new camera and colour screen phones will revive the stagnant market. Mobile phone sales fell last year for the first time in more than two decades. Until now, consumers have been reluctant to splash out on new phones with little in the way of new technology and the poor performance of Web-enabled phones. Nokia said sales are now expected to total between 8.8 billion and 9 billion euros as customers have not been persuaded to swap old handsets for new higher-end phones. It had previously forecast sales of 8.9 billion to 9.2 billion euros.
"Handset sales, while being seasonally strong, have tended towards the mass-volume end of the product portfolio in the lead-up to the holiday season,'' Nokia said in a statement on Tuesday. Nokia's (NOK) stock, which has lost more than a third of its value this year, fell 4.5 percent to 17.14 euros in midday trading in Helsinki. The company's stock has risen about 75 percent from a year low of 10.52 euros in July. Its outlook knocked the stock prices of rivals on Tuesday. Ericsson, the world's biggest maker of wireless infrastructure, slid 6.5 percent to 7.90 euros in Stockholm and France's Alcatel (PCGE) lost 4.6 percent to 5.20 euros.
Pro-forma earnings per share in the October to December period is expected to fall comfortably in the previously indicated range of 0.23 to 0.25 euros, Nokia said. Analysts and investors had widely expected the company to say Christmas sales were solid -- if not spectacular -- after Nokia's Chief Executive Jorma Ollila, who is credited with turning Nokia into the world's largest and most profitable handset maker, cautioned earlier this month:
"The company expects 10 percent or slightly more handset market growth in 2003 -- while anticipating a challenging industry environment in wireless infrastructure to continue." Ollila had previously said there was a good chance the global handset market would grow by up to 15 percent in terms of unit sales in the next three years. Nokia has a target of more than 10 percent annual sales and earnings growth for 2003 and beyond. The Finnish company reiterated on Tuesday it expected global sales of 400 million mobile phones in 2002. But it said pro forma operating margins -- the percentage difference between sales and costs -- at its key mobile phones business would exceed the 22 percent level seen in the third quarter. It had previously expected flat margins quarter-on-quarter. As telecom operators continue to curtail spending on infrastructure, Nokia expects a pro forma operating margin of about zero at its networks division, down from a previous forecast of margins of about five percent. Nokia is due to give full fourth-quarter earnings along with its 2002 annual report on January 23. Reuters contributed to this report.
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