Nokia warning send shares falling

How low can you go?

Nokia yesterday warned that earnings will continue to decline in 2004, sending the company's stock sharply lower.

The mobile phone maker said that earnings per share will be between €0.08 and €0.10 in the third quarter, substantially below last year's €0.17 figure and well behind expectations of around €0.14. It also said that sales in the three-month period would be lower than last year's €6.87bn in third quarter revenues.

The warning, Nokia's third in three months, came alongside the company's second quarter results. During the period, the firm had net income of €712 million, or €0.15 a share, from €624m, or €0.13, a year earlier, when one-time costs shaved about €0.06 off its per share figures. Earnings were in line with a previously announced profit warning, but were well behind expectations. The company also posted a one-time gain of €0.03 from an asset sale.

Q2 revenues declined by about five per cent to €6.64bn. Despite the fall, the figure was one of the few bright spots in a set of results that also showed weaker margins, since turnover was ahead of the average forecast.

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

Ollila said the company's mobile device sales hit 45.4 million units during the second quarter. But this represents market share of just 31 per cent, compared with 32 per cent based on the company's revised total market volume estimate of 141 million units in the first quarter of 2004.

Analysts viewed the results as more evidence that Nokia rivals such as Motorola and Sony Ericsson are stealing market share, following Nokia's failure to introduce enough of the kinds of devices that have proven successful for other players - mid-priced camera phones and clamshell-style handsets. Its efforts to stem its market share losses have included a revamped product line-up and price cuts, which have had a clear impact on the company's bottom line.

Nokia noted that the global mobile device market continued to grow during the second quarter 2004, reaching 148 million units. It expects shipments to surpass 600 million units for the full year 2004.

© ENN