Nokia Oyj, the world's largest mobile- phone maker, said third-quarter profit and sales will fall as it cuts prices to counter increased competition. The stock plunged as much as 12 percent.
Third-quarter earnings per share will drop to 8 cents to 10 cents from 17 cents a year earlier, Espoo, Finland-based Nokia said in a statement to the Helsinki exchange. Sales this quarter will probably decline to 6.6 billion euros to 6.8 billion euros from the 6.87 billion euros it had in the year-earlier period.
``The company expects its profitability to continue to come under pressure during the second half of the year,'' Nokia said in the statement. ``Nokia will continue to use pricing selectively and aims to strengthen the competitiveness of its product portfolio in order to increase its market share in the highly competitive mobile device market.''
Revenue at Nokia is sputtering as Motorola Inc., Siemens AG and LG Electronics Inc. phones with cameras and color screens gain in popularity. While unit sales rose, Nokia's revenue fell in 2002 and 2003 as Western markets became saturated, phone prices slipped and the dollar fell against the euro.
In the second quarter, net income rose to 712 million euros (880 million), or 15 cents a share, from 624 million euros, or 13 cents, a year earlier, when costs to cut jobs reduced profit by 6 cents. Sales fell 5 percent to 6.64 billion euros from 7.02 billion euros a year earlier.
Nokia shares fell as much as 1.36 euros to 10 euros, and traded at 10.09 euros as of 1:14 p.m. in Helsinki.
Company Focus
Chief Executive Officer Jorma Ollila in April said Nokia will focus on market share at the expense of margins, through price cuts and more spending on marketing. Nokia has since introduced cheaper phones, reduced prices of existing models and said it plans to focus on fewer products than originally planned.
The price cuts, coupled with Nokia losing ``some of its reputation for innovation,'' makes the company's profitability vulnerable, Fitch Ratings said in June. Fitch changed its outlook on Nokia's long-term debt to ``negative'' from ``stable,'' increasing the likelihood of a rating cut.
Nokia's global market share fell to 28.9 percent in the first quarter from 34.6 percent a year earlier, Stamford, Connecticut-based researcher Gartner Inc. said. The company's stated long-term target is 40 percent global market share.
The Competition
All of Nokia's five main competitors took market share in the period on growing demand for phones with color screens and cameras, features that make so-called clamshell phones that flip open to reveal a larger screen popular. Nokia sold it first clamshell model in Europe in March, years after some rivals.
Sony Ericsson Mobile Communications Ltd., the world's No. 5 handset maker with a 5.6 percent market share, today said sales rose one-third to 1.5 billion euros in the second quarter. Net income was 89 million euros, a fourth straight quarterly profit, compared with a loss of 88 million euros a year earlier.
Motorola, the runner-up to Nokia with 16.4 percent of the cellular-phone market in the first quarter, according to Gartner, reports earnings on Tuesday, July 20. Motorola probably earned 18 cents a share in the quarter on sales of $8.5 billion, according to a survey of analysts by Thomson Financial.
Samsung, the No. 3 mobile-phone maker with 12.5 percent market share in the first quarter, reports earnings next month.
Filling Gaps
Ollila, 53, said in April Nokia had been too slow to fill gaps in its product range, such as adding a clamshell model.
Nokia fell out of step with consumers' demands just as mobile-phone sales recovered with the popularity of picture- taking and Web capabilities. Only 6 percent of Nokia phones sold last year had a camera, while it was 30 percent for Sony Ericsson and 18 percent at Samsung, according to Boston-based researcher Strategy Analytics.
Global handset sales volumes will rise to more than 600 million units this year from 520 million units sold in 2003, after gaining a fifth last year, Gartner forecasts. Nokia in June predicted industrywide sales of 600 million units this year and Sony Ericsson today matched that forecast.
Nokia has said it will speed up introductions of new phones in the last three quarters of the year, bringing the number to 35 in 2004. Samsung plans to introduce about 50 phones in its domestic market alone.
Nokia in May introduced the 3220, which has small flashing lights designed to help friends contact each other in crowded spaces such as open-air concerts. It plans to introduce ``half a dozen'' clamshell models this year, Ollila has said. It last quarter started selling the 7610, its first camera phone with one- megapixel resolution, producing higher-quality pictures.
So long,
Calexa
www.investorweb.de
