Nokia lowers sales forecast, sees growth ahead

Nokia, the world's largest mobile phone maker, lowered its year 2001 worldwide handset shipment forecast on Tuesday, but said it expects sales to recover next year and grow from then on.

Nokia, of Espoo, Finland, now expects a total of about 380 million mobile phones will be sold worldwide in the year 2001, an adjustment from its previous forecast of 390 million, published in October together with its third-quarter results. Last year a record 413 million handsets were sold, according to research firm Dataquest Inc., a unit of Gartner Inc.

"It is unusual to see Nokia changing figures in such a short time," said Ben Wood, senior analyst with Dataquest.

The adjustment could mean that Nokia doesn't see Santa giving away many phones, Wood said.

"We've said that if the normal holiday sales jump isn't realized, it would be difficult to reach a target of (about) 400 million," he said.

Nokia doesn't anticipate a significant upswing in the U.S. economy until the end of 2002 at best, according Chairman and Chief Executive Officer Jorma Ollila. In Europe, the company's predictions are equally grim: "I don't think there's going to be any good news in Europe in the next nine months. Europe will follow the U.S. economy, with some delay," he said Tuesday in New York, at the company's annual meeting with analysts.

Looking beyond Christmas, Nokia said it foresees a sales pickup next year, with between 420 million and 440 million handsets sold worldwide, representing year-on-year market volume growth of between 10 and 15 percent. Double-digit annual-volume growth should continue from 2002 onward, according to Nokia, which is meeting with analysts in New York on Tuesday.

Wood seconded Nokia's forecast, saying that the industry will see a stable growth curve, instead of jumps and falls. In 1999 about 283 million handsets were sold; the figure jumped to 413 million in 2000. Dataquest now expects a 10 percent drop year-on-year for 2001.

"I still find the figures reported in 2000 difficult to believe," Wood said. "We are headed to a more stable growth curve, between 10 and 15 percent. The year 2001 is reflecting the phenomenal growth in 2000."

Nokia repeated its long-term goal of gaining a 40 percent share of the handset market. The company had a 33.4 percent share in the third quarter, according to Dataquest.

Additionally, Nokia said it expects 15 percent in revenue growth for both its handset and mobile infrastructure divisions for the full year 2002. The company also reiterated that it expects the number of mobile phone subscribers to hit 1 billion in the first half of next year and said that 3G (third-generation) handsets should make up roughly 10 percent of handset sales in 2003.

Ollila and several other executives took pains in their presentations to defend against charges that the mobile phone industry is part of the same trend afflicting PC manufacturers, in which their products are becoming a commodity. Technical innovation is still key in the mobile sector, Ollila argued, and forthcoming advances -- including 3G networks -- will make distinctions between manufacturers even more crucial.

Nokia is still on track for a U.S. 3G commercial rollout in the second half of 2002, Ollila said. The company has already launched 3G service in Japan; that experience convinced Ollila that handset technology is still one year away from genuine 3G readiness, he said during a question-and-answer session. He cited the short battery life of current handsets when handling intensive multimedia tasks as one particular challenge that emerged.

Several analysts at the event said they were underwhelmed by Nokia's presentation and dubious about its stance that mobile handsets aren't becoming commodities, but they generally were pleased with its results. After a disappointing second quarter that saw Nokia posting its first year-over-year revenue decline in half a decade, the company scraped by in the third quarter with results that just beat its own lowered estimates.

"In this market, to have the performance they've had is remarkable," said Mirva Anttila, senior analyst with Danske Securities. There were no surprises in Nokia executives' comments at the meeting, she said.

Several analysts -- who asked that their names not be used -- noted that this year's gathering was significantly more sedate than last year's meeting, held in London in early December. "Last year, they laid on the razzmatazz and made a whole slew of predictions, none of which came true," said one analyst in attendance last year. "Maybe they're a bit burned by that. They're not really saying much today."

Nokia is "always very conservative, except last year," said Anttila, who has attended the meetings for several years. She agreed that the executives' comments were toned down this year. "That's appropriate for the current environment," she said.