Nokia Hit by Profit Concerns
By Carolyn Koo
Staff Reporter
2/22/01 11:48 AM ET
Shares of Nokia (NOK:NYSE ADR - news) dropped as much as 9% Thursday as rumors of a profit warning from the world`s
largest maker of mobile phone handsets swirled through the market.
They recently rebounded and were down 85 cents, or 3.5%, to $23.40 in midday trading.
Worries about further diminishing growth of handset sales are punishing Nokia, which had double the worldwide market share of
its nearest competitor, Motorola (MOT:NYSE - news), in the fourth quarter, according to research firm Dataquest.
However, Johan Carlstrom, an analyst with Swedish investment bank Handelsbanken, thinks the selloff is unwarranted. "A profit
warning is already discounted in the share price," Carlstrom explains. "Around these levels, the stock is cheap." Nokia`s
American depositary receipts are off 63% from their 52-week high of $62.50. (He rates Nokia a buy, and his firm hasn`t done
underwriting for the company.)
In January, the three major players -- Nokia, Motorola and Ericsson (ERICY:Nasdaq - news) -- all took down their estimates for
handset sales in 2001. However, there is increasing concern that the companies will reduce those estimates even more because
of slow first-quarter handset sales in mature European markets like Italy, France, Germany and the U.K., as well as a more
sustained economic slowdown in the U.S. than originally envisioned.
Carlstrom says he`s considering another reduction for his 2001 handset forecast, to a range of 490 million to 510 million from 525
million. European sales have slowed because fewer people than expected are replacing their current phones.
Nokia, which shrank its forecast last month to a range of 500 million to 550 million units, from 550 million, didn`t return calls for a
comment. However, Carlstrom says the company reaffirmed its 2001 forecast when he spoke with management on Wednesday.
But even if Nokia should reduce that estimate further, to maybe 490 million phones, "Lower global volumes are already
discounted in the price," Carlstrom says. He does acknowledge though that a figure as low as 450 million would be a drastic
reduction and one that`s not factored into the share price.
Lower handset growth will cut into Nokia`s anticipated revenue, unless it manages to significantly increase its market share.
Indeed, on a conference call at the end of January, the company stated that one of its goals for the year is to aggressively take
more share.
In the fourth quarter, Nokia expanded its leadership to 33.9% of the market, while Motorola slipped to 12.7% and No. 3 Ericsson
dipped to 8.7%.
By Carolyn Koo
Staff Reporter
2/22/01 11:48 AM ET
Shares of Nokia (NOK:NYSE ADR - news) dropped as much as 9% Thursday as rumors of a profit warning from the world`s
largest maker of mobile phone handsets swirled through the market.
They recently rebounded and were down 85 cents, or 3.5%, to $23.40 in midday trading.
Worries about further diminishing growth of handset sales are punishing Nokia, which had double the worldwide market share of
its nearest competitor, Motorola (MOT:NYSE - news), in the fourth quarter, according to research firm Dataquest.
However, Johan Carlstrom, an analyst with Swedish investment bank Handelsbanken, thinks the selloff is unwarranted. "A profit
warning is already discounted in the share price," Carlstrom explains. "Around these levels, the stock is cheap." Nokia`s
American depositary receipts are off 63% from their 52-week high of $62.50. (He rates Nokia a buy, and his firm hasn`t done
underwriting for the company.)
In January, the three major players -- Nokia, Motorola and Ericsson (ERICY:Nasdaq - news) -- all took down their estimates for
handset sales in 2001. However, there is increasing concern that the companies will reduce those estimates even more because
of slow first-quarter handset sales in mature European markets like Italy, France, Germany and the U.K., as well as a more
sustained economic slowdown in the U.S. than originally envisioned.
Carlstrom says he`s considering another reduction for his 2001 handset forecast, to a range of 490 million to 510 million from 525
million. European sales have slowed because fewer people than expected are replacing their current phones.
Nokia, which shrank its forecast last month to a range of 500 million to 550 million units, from 550 million, didn`t return calls for a
comment. However, Carlstrom says the company reaffirmed its 2001 forecast when he spoke with management on Wednesday.
But even if Nokia should reduce that estimate further, to maybe 490 million phones, "Lower global volumes are already
discounted in the price," Carlstrom says. He does acknowledge though that a figure as low as 450 million would be a drastic
reduction and one that`s not factored into the share price.
Lower handset growth will cut into Nokia`s anticipated revenue, unless it manages to significantly increase its market share.
Indeed, on a conference call at the end of January, the company stated that one of its goals for the year is to aggressively take
more share.
In the fourth quarter, Nokia expanded its leadership to 33.9% of the market, while Motorola slipped to 12.7% and No. 3 Ericsson
dipped to 8.7%.
