Nokia sales decline 2pc

16 Apr 2004

Just as the company warned two weeks ago, Nokia’s Q1 sales fell 2pc to €6.6bn because the company failed to exploit market opportunities. The company reported a profit of €1.1bn, down from €1.4bn a year ago.

The company this afternoon reported that mobile phone sales decreased 15pc to €4.3bn, compared with €5bn a year ago.

Multimedia net sales, however, increased 60pc to €776m and enterprise solutions net sales increased 95pc to €189m.

Despite failing to exploit opportunities in the mobile sector, Nokia nevertheless views the mobile market as healthy with mobile device industry volume growing 29pc this year. Nokia’s overall mobile device volume grew 19pc to 44.7m units giving the company a 35pc global market share.

Nokia’s failure to take advantage in the mobile market, which some attribute to its disdain for clamshell mobile devices popular in Asia and growing in popularity in Europe, has sparked a lawsuit by investors. Milberg Weiss Bershad Hynes & Lerach LLP is taking the class action suit against Nokia CEO and chairman Jorma Ollila, chief financial officer Richard Simonson, chief strategy officer Matti Alahuhta and president Pekka Ala-Pietila in the US District Court for the Southern District of New York. The law firm alleges that during the class action period, Nokia had forecast sales growth of 3 – 7pc, that it expected market growth to continue, and that it had a strong position in the market for mobile phones.

In a statement, Nokia CEO and chairman Jorma Ollila commented: “Overall mobile device industry volume continued to grow at a very healthy pace of 29pc in the first quarter 2004, according to our preliminary estimate. This is clearly a vibrant market that is expanding into new areas and attracting many new users every day.

“Nokia’s own first-quarter mobile device volume growth of 19pc, slower than the market, reflected that Nokia was not able to fully exploit the usual seasonal market pick up in March. As a result, our sales for the quarter did not meet our expectations and our mobile device market share declined to 35pc, based on our preliminary estimate. However, our long-term mobile device market share target remains unchanged at 40pc.

“Despite mobile phones and multimedia device sales not meeting our expectations, overall we maintained good, solid profitability, illustrating the company’s ability to manage costs. I am pleased with the strong growth in networks’ sales and the networks” operating margin of 12.9pc, which reflected the positive product mix as well as the full impact of the restructuring measures taken in early 2003.

He later added: “We are not satisfied with our sales development during the first quarter. I realise that improvements require additional effort and a lot of hard work, but I have confidence in the ability of the Nokia team to address and meet customer needs in all segments by further strengthening our product portfolio.”

By John Kennedy