Nokia profit drops for first time in five years

Nokia missed its own second-quarter sales forecast, which was lowered last month. The Finnish telecommunication equipment maker reported a pro forma net profit Thursday of 830 million euros (US$710 million), down 16 percent from the 984 million euros reported in the second quarter of 2000, and its first decline in five years.

Net sales for the three months amounted to 7.35 billion euros, a 5 percent increase over the 6.98 billion euros for the same period last year, Nokia said in a statement. In its June 12 revised outlook Nokia said it expected year-on-year sales growth to be "somewhat below 10 percent," compared with its earlier estimate of 20 percent.

Diluted pro forma earnings per share were 0.17 euros, equivalent to $0.15, meeting the consensus estimate of 20 analysts polled by Earnings.com. The diluted pro forma earnings per share were at the upper end of Nokia's revised guidance of between 0.15 euros and 0.17 euros. Nokia earned 0.21 euros a share in the second quarter of 2000.

Sales at Nokia Mobile Phones, the company's handset division, grew 10 percent to 5.35 billion euros in the second quarter of 2001 from 4.88 billion euros last year. Sales at Nokia Networks, the unit that sells mobile phone networks, declined 2 percent and came in at 1.9 billion euros, compared to 1.93 billion euros in the second quarter of 2000.

"Reduction in mobile phone subsidies by operators and economic uncertainties have slowed down the handset replacement cycle," said Jorma Ollila, chairman and chief executive officer of Nokia in a conference call with analysts and reporters.

Nokia, the world's largest maker of cellular phones, said growth in mobile phone sales was strong in Europe and the Asia/Pacific region, while sales declined in the Americas. Worldwide, Nokia believes it maintained its mobile phone market share at more than 35 percent.

Nokia must have increased its market share in Europe as sales were strong amid a market slowdown, Ollila said. Rival Motorola Inc., when it presented its second-quarter results last week, said its mobile phone sales dropped 25 percent compared to the second quarter of 2000 with sales dropping in Europe, Asia and the U.S.

Nokia's network sales dropped significantly in Europe and were flat in North America, with markets adversely affected by operators' reduced investments in existing networks. Nokia Networks did see sales growth in Asia, notably in China, Ollila said.

"In light of the overall economic conditions Nokia posted a good result," said Peter Richardson, a vice president and chief analyst with research firm Dataquest Inc., a unit of Gartner Inc.

The Finnish telecommunication equipment vendor said it doesn't believe the market will pick up again until next year. Nokia previously said it expected a revival of the market in the second half of 2001. However, Nokia expects shipment of GPRS (General Packet Radio Service) handsets to be "in the millions" in the fourth quarter, Ollila said. Operators, mainly in Europe, have long had GPRS networks ready and have been waiting for handsets.

For the third quarter, Nokia expects revenue growth to be flat at 5 percent. The company isn't giving guidance for the fourth quarter, due to the "lack of visibility." For the full year, Nokia estimates the global mobile phone market to show little to modest volume growth compared to 2000, when about 405 million handsets were sold.

"The industry will show healthy growth in 2002 when we will see service offerings beyond basic voice which will stimulate and accelerate the handset replacement cycle," Ollila said. Nokia expects revenue growth to return to the level of 25 percent to 35 percent at some time during 2002.

Nokia rival L.M. Ericsson Telephone Co. is scheduled to announce its second-quarter figures on Friday.

Join the newsletter!

Error: Please check your email address.

More about DataquestEricsson AustraliaGartnerMotorolaNokiaNokia Mobile PhonesNokia Networks

Show Comments