Nokia predicts flat Q3

17 Jul 2003

Mobile phone giant Nokia has echoed competitor Motorola in warning of declining volumes of mobile phone sales. In its second quarter results, the company reported a 1pc rise in sales revenue of €7bn, and warned that sales of Nokia phones are likely to be flat or slightly down year on year due to US economic weakness and depreciation of the dollar.

In the second quarter, mobile phone sales rose by 2pc year on year, reaching €5.5bn. Although mobile volumes grew by 14pc, sales were adversely affected by a weak US dollar. Sales in Nokia Networks were flat at €1.5bn reflecting flat sales in Europe and lower sales in Asia.

During the second quarter Nokia took a charge of €399m to restructure its Networks division. By the end of 2003, it is estimated that Nokia Networks will comprise 15,000 employees – 2,361 less than the number employed at the division in December.

The company said its cash position remained healthy, with total available cash at €9.9bn at the end of the quarter.

Going into 2003, Nokia said it expects third quarter mobile phone volumes to grow by well over 10pc, representing faster-than-market growth, with strong profitability continuing. However, it said, sales of Nokia mobile phones in the third quarter are expected to be flat or slightly down on the year, largely due to a major depreciation of the US dollar.

In Nokia Networks operating conditions show no sign of improvement and the company expects a year-on-year sales decline of 15-20pc for the third quarter, resulting in an operating loss in the third quarter.

Nokia president and CEO Jorma Ollila commented: “We gained in two strategic focus areas: the US, our largest market, and the global CDMA (code-division multiple access) market. Nokia’s market share in mobile phones is now estimated at 39pc, marking both a sequential and year-on-year increase for the second quarter. Overall, however, our sales reflected general economic and US-dollar weakness.

“Our 14pc growth in mobile phone volumes during the quarter was supported with shipments of 13 new models. Key to our success has been, and will continue to be, our winning execution and strong competitive position in all major technologies and segments. For the full year 2003, we are looking to enhance our leadership with a record launch of more than 35 new models,” Ollila said.

By John Kennedy