Nokia shares fall on profit alert
By Matti Huuhtanen
Associated Press
HELSINKI, Finland — Citing a slowdown in the U.S. economy, the world's largest cell phone maker Nokia said yesterday its earnings and revenue growth will be lower than expected in the current quarter.
Bloomberg News Service
The announcement took the market by surprise and Nokia's share price plunged 22.8 percent to close at 26.52 euros ($22.46) in trading on the Helsinki Stock Exchange. In trading on the New York Stock Exchange, Nokia's U.S. shares were off $5.45, or 19 percent, at $23.26.
Despite the popularity of its 8860-model cell phone, Nokia Corp. cut its forecast for sales and profit for 2001, saying the slowdown in the U.S. economy has spread worldwide.
"We have recently seen a weakening in market conditions to levels below our earlier estimates," said Jorma Ollila, Nokia's chief executive.
Nokia said the slowdown has spread from the United States, its biggest market, to the rest of the world.
"We believe that this slowdown is a result of a general market deterioration — driven by economic uncertainty, the ongoing technology transition and less aggressive marketing by the operators," Ollila said in a statement.
Unlike its main rivals, Sweden's Ericsson and U.S.-based Motorola, Nokia has largely avoided major layoffs and continued to churn out record profits.
But in April, Nokia also showed signs that it was feeling the pinch caused by a global economic downturn. It said its operating profit margin this year would be "in the high teens," instead of the earlier predictions of 25 percent to 30 percent.
Yesterday, Nokia lowered its expectations for revenue growth from the 20 percent predicted in April to less than 10 percent growth for the three month period ending June 30.
It also said its earnings per share would be between 0.15 euros and 0.17 euros (12 cents and 14 cents) instead of its earlier estimate of 0.20 euros (17 cents).
Jussi Hyoty, chief analyst at FIM banking group in Helsinki, blamed the warning on a slowdown in global mobile phone sales and said he maintained confidence in the company.
"Nokia's share price will stay low for awhile, but in the long term it seems that Nokia will continue to strengthen its market share ... so it may just be short-term bad news," he added.
Nokia said it expects growth in the global mobile phone market to be "very modest" compared to 2000, when about 405 million phones were sold, but that sales in the second half of the year will be significantly larger than during the first half.
It also warned that the slower growth will lead some operators to delay network investments but said its own mobile phone business will grow faster than the market during 2001.
Nokia said it will provide updated estimates for the second half of 2001 when it releases its second-quarter results on July 19.
Nokia, with headquarters in Espoo, just outside of the capital, Helsinki, has more than 60,000 employees and sales in 130 countries.
Its net profit last year was 3.9 billion euros ($3.5 billion), up from 2.6 billion euros in 1999, on net sales of 30.4 billion euros ($27 billion).
