Nokia lowers sales forecast, upbeat on profit

Nokia Corp., the world's largest mobile phone maker, lowered its third-quarter sales forecast on Tuesday, reflecting lower-than-expected demand for mobile communications equipment, but maintained its earnings forecast.

Company-wide third-quarter sales will be between €7.1 billion (US$6.96 billion) and €7.4 billion, the Espoo, Finland, company said in a statement.

In July, the company forecast sales for the third quarter of between €7.2 billion and €7.6 billion. Earnings per share will likely be in the upper end of the previously estimated range of €0.15 to €0.17, Nokia said.

Its mobile phone sales will grow between 4 percent and 9 percent in the third quarter compared to the year before, according to Nokia, which sees mobile phone profitability in line with, if not exceeding, earlier expectations.

The company said it is confident with its full-year overall market volume estimate of 400 million handsets in 2002.

Nokia expects pro forma operating margins to be at or above 20 percent, reflecting strong take-up of the company's new products, such as the Nokia 7650 with a built-in camera. "The market is responding better than expected to our new products," said Olli-Pekka Kallasvuo, chief financial officer of Nokia, in a conference call with analysts.

Last week, Nokia introduced its 3650 model, with a color screen, camera, video player and the possibility of an extended memory for storing pictures, games and other files. The new model, which supports MMS (Multimedia Messaging Service) as well as access to the Internet, follows the Nokia 7650.

Demand for network infrastructure equipment is slowing as operators struggle with their mounting debt and stagnate sales, the company said. Nokia Networks, the division that sells mobile phone networks to operators and accounts for around one fifth of the group's sales, expects third-quarter sales to decline around 5 percent year-on-year, Nokia said. The operating margin, or operating profit as a portion of sales, will be about 5 percent of the unit, it said.

Sales of W-CDMA (Wideband Code Division Multiplex Access) infrastructure equipment for 3G (third generation) networks will be around €500 million in the third quarter, Kallasvuo said.

Nokia, which provided financing to Mobilcom AG to buy 3G network equipment, will write down €300 million related to loans to the Rendsburg-Büdelsdorf, Germany, operator in the third quarter under an agreement with Paris-based France Telecom SA, the former French monopoly telephone company that owns 28.5 percent of Mobilcom.

As part of this agreement, Nokia will also withdraw all other commitments to Mobilcom, reducing the Finnish vendor's total customer financing commitment by an additional €530 million. The agreements, Kallasvuo said, are subject to the "overall resolution of the MobilCom situation."

France Telecom is expected this week to announce whether it will acquire or cease funding the financially troubled mobile operator. The latter would almost certainly lead to its bankruptcy.

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