Nokia disappoints with falling sales

15 Jul 2004

Finnish mobile giant Nokia’s second quarter results have come in below analysts’ expectation. For the third time in a year, disappointing results from Nokia have triggered a sell-off in shares.

Net sales declined 5pc to €6.6bn, down from €7bn a year earlier. Despite the fall in sales, operating profit at Nolia was €907m, up from €818 last year, and net financial income was €135m, up from €131m last year.

Mobile phone sales decreased 13pc to €4.1bn, compared with €4.8m a year ago, yielding the company a €797m operating profit, significantly less than the €1.3bn reported last year. Network net sales increased 6pc to €1.5bn with a €255m trading profit.

Operating cash flow was €1.4bn and the company had some €11.5bn in the bank at the end of the quarter.

An unfazed Jorma Ollila, Nokia’s chairman and CEO, commented: “The global mobile device market continued to grow during the second quarter 2004 reaching 148m units, according to our preliminary estimate. We expect the total market volume to surpass 600m units for the full year 2004. Many markets, such as Brazil, India and Russia, experienced strong industry growth as mobile communications continued to become an affordable option to new subscribers.

“Nokia’s sales benefited from the positive developments especially in emerging markets, but Europe and to a lesser extent the US remained challenging. During the second quarter, we employed pricing selectively with certain products to stabilize our mobile device market share. This pricing strategy along with our market mix also impacted sales and operating margins in the second quarter.

“With Nokia mobile device sales of 45.4 million units during the second quarter, we currently estimate our market share at 31pc. This compares with 32pc based on our revised total market volume estimate of 141 million units in Q1 2004. With appealing entry-level products, we fortified our number one position in Latin America and in the China market. Towards the end of the quarter, our market share started stabilizing in many of the Western European markets,” Ollila said.

By John Kennedy