Nokia net profit up 41 percent in Q4

Nokia Corp. once again beat analyst expectations today when it announced a 41 percent increase in its net profit for the fourth quarter of 2000. Calling it's results "nothing short of extraordinary," the Finnish mobile phone maker said its net profit in the last quarter of 2000 was 1.2 billion euros (US$1.1 billion), or 0.25 euros per share, compared to 853 million euros, or 0.18 euros, in the same period a year ago.

Nokia easily beat the consensus forecast of US$0.21 (0.23 euros) of 20 analysts polled by First Call/Thomson Financial.

For the year Nokia said net income was 3.94 billion euros, or 0.84 euros per share, up 53 percent from 2.58 billion euros in 1999. Analysts had forecast earnings per share of US$0.73 (0.79 euros), according to First Call/Thomson Financial.

Sales for the quarter reached 9.28 billion euros, up from 6.37 billion euros in the year ago period. In the full year sales rose 54 percent to 30.38 billion euros from 19.77 billion euros in 1999.

Although Nokia is cheering about its 2000 results, the company won't escape the effects of the overall slowdown in the mobile phone handset market. The company said it is "challenging to forecast short-term market developments," but stated that first quarter growth should be between 25 and 30 percent. Earnings per share will drop to 0.19 euros, the level of the first quarter of 2000.

Nokia shares were down 7.15 percent at 37 euros in afternoon trading at the Helsinki stock exchange.

Nokia has slightly lowered its growth projections for the mobile phone market. The reigning mobile phone company now estimates the mobile phone market to reach between 500 million and 550 million units this year, a growth of 25 to 35 percent compared to 405 million in 2000. Earlier Nokia said it expected the market to reach "in the region of 550 million" units in 2001.

In a conference call with reporters and analysts Nokia Chairman and Chief Executive Officer Jorma Ollila said Nokia "is not immune (to market slowdown)," but that Nokia "will prevail." The two main causes for the troubles, Ollila said, are "most importantly a slowdown in primarily the U.S. economy," and the cutting back of handset sponsoring by mobile operators.

Growth this year will be highest in the last six months. "The problems will be alleviated in the second quarter," Ollila said.

Nokia still expects the worldwide mobile subscriber base to break through the 1 billion barrier in the first half of 2002. At the end of the year 2000 the subscriber counter stood at about 715 million, Nokia said in a statement; this represents global mobile phone "penetration" of about 12 percent.

Overall Nokia sold 128.4 million mobile phones in 2000, a 64 percent growth compared to 78.5 million in 1999. Growth in volume was highest in Europe, at slightly above 50 percent, followed by the Americas, about 45 percent, and 35 percent the Asia Pacific.

Nokia rival L.M. Ericsson Telephone Co., with a 10 percent market share the third player on the mobile phone market, announced Friday it would outsource all handset manufacturing to Asian partners that work cheaper. Ericsson hopes the move will restore profitability at its Consumer Electronics division. Motorola Inc., number two on the handset market with a 13 percent share, has also put much of its production in third party hands. Nokia, which has a 31 percent share of the market, is following the trend, but by far not as aggressively as Ericsson. Ollila said Nokia intends to double outsourcing of manufacturing, but would manufacture most of its handsets in-house.

"We now outsource about 10 percent of our manufacturing -- that will go to about 20 percent this year," he replied to questions on the topic during the conference call.

Ollila said Nokia found convincing reasons to stick with its own production facilities. "We could not find a contract manufacturer that could beat us in efficiency," said Ollila.

Another reason for in-house manufacturing is easy communication between research and development and production divisions. Additionally Nokia found that outsourcing would result in complicated supply chain management, Ollila said.

Nokia in Espoo, Finland is at +358-9-5113-8193, or at http://www.nokia.com/.

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