Nokia reports lower profits; issues gloomy 04 forecast

19 Apr 2004

Shares in Finnish equipment manufacturer Nokia fell by more than 8% on Friday as the company reported a disappointing set of financials for the first three months of 2004 before adding that it expected profits and revenues to fall again in the current quarter. The world’s largest handset manufacturer said increasing competition from the likes of Samsung and Siemens combined with falling prices for terminal equipment saw total sales decrease by 2% to EUR6.625 billion, compared to the corresponding period of 2003, with net profits falling by 15% to EUR816 million. Its core Mobile Phones subsidiary recorded a turnover of EUR4.25 billion, down 15%, despite handset unit sales rising by 19% to 44.7 million. Good performances by the company’s other divisions covering Networks (sales up 16% at EUR1.415 billion), Multimedia Products (60% at EUR776 million) and Enterprise Solutions (95% at EUR189 million) failed to offset the falling handset returns, or improve Nokia’s gloomy short-term outlook. The company’s chairman and CEO Jorma Ollila indicated second quarter revenues would be lower than last year’s EUR7 billion, whilst profits would also be lower than the current quarter due to the impact of a number of unnamed one-off items. He added that sales had been affected by ‘a product mix more weighted towards the low-end’, and that the benefits of the company’s new product launches aimed at stabilising its market share would not have an impact on sales until the fourth quarter of 2004.

According to Nokia, the handset supply industry grew by 29% to 128 million units in the first quarter of 2004. Despite its own shipment levels going up by 19%, its growth is being far outstripped by a number of up and coming handset suppliers, chiefly from the Asia-Pacific region, among the most notable of which is Samsung. The South Korean company, which on Friday reported a threefold increase in first quarter profits at KRW3.1 trillion, sold a record 20 million handsets in the first three months of 2004 and recently said that it expects to beat its previous full year forecast of 65 million units. Another supplier making ground on Nokia is the Japanese-Swedish joint venture Sony-Ericsson, which at the weekend reported its third straight quarterly profit on the back of sales of 8.8 million handsets, a rise of 63% on the same period of 2003.

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