More gloom for telecoms

January 21, 2002 Posted: 1618 GMT

LONDON (CNN) -- Investors can expect more gloomy news from the telecoms sector this week when Europe's biggest companies post their quarterly results.

Among them: Finnish giant Nokia, which controls one third of the world's mobile phone market, as well as rivals Ericsson of Sweden and Siemens of Germany.

While analysts expect this week's numbers to confirm what many already  know – that 2001 was a dismal year for the telecoms sector – they also believe that 2002 may not be much better.

The most anticipated results will come from Nokia on Thursday. The world's largest mobile phone maker is expected to report a decline in fourth-quarter profits.

Nokia's pre-tax profit is expected to fall 22 percent to 1.43 billion ($1.2 billion) in the final quarter of 2001, according to analysts polled by Reuters. Earnings per share is expected to be 0.20, down from 0.25 a year earlier when demand for hands reached a peak.

Those numbers are in line with Nokia's own forecasts, which it reaffirmed last month.

	Our expectations are not good for the first quarter.
	Michael Schroder, Finnish brokerage Opstock

Nokia also said sales would grow 20 percent in the fourth quarter, up from 7.1 billion in the third-quarter but lower than the 9.28 billion posted in the fourth quarter of 2000.

For 2002, Nokia said sales would grow 15 percent with handset sales amounting to 440 million.

Many experts do not share the company's optimism for the coming year, with many calling for flat sales in 2002. They are especially concerned about Nokia's performance in the first quarter, when sales are traditionally weak.

"Our expectations are not good for the first quarter," Michael Schroder, an analyst at Finnish brokerage Opstock, told Reuters. "[Nokia] may give a small warning on revenues."

Investment bank Merrill Lynch has also expressed doubt about Nokia's ability to crank up sales.

"We remain concerned with the global handset market in the first half of 2002 and with Nokia's product mix in the first quarter," it said in a research note.

Nokia and other telecoms heavyweights have been hit by the global economic slowdown and recession in major economies, such as the U.S. and Japan. Many economists also believe Germany fell into recession in the fourth quarter of 2001.

Many telecoms operators have cancelled orders for new infrastructure in an effort to control costs and cut debts. In addition, consumers have delayed purchases of new phones while they await more attractive services that give quick access to the Internet.

Nokia responded to the sector slump by cutting 4,700 jobs from its 60,000-strong workforce.

	We now anticipate that the difficult market conditions will persist well into next year.
	Kurt Hellstrom Chief Executive Officer Ericsson

On Monday, when Morgan Stanley Dean Witter lowered its rating on Nokia to "underperform" from "neutral" and set a price target of 15 for its stock.

Morgan Stanley said it downgraded Nokia's stock because of the continuing weakness in the sector, and the investment bank also reduced its 2002 growth forecast for the industry by 6 percent.

Meanwhile, Siemens, Germany's biggest engineering and telecoms company, will report its quarterly results on Wednesday.

The company is expected to post a net loss of 66 million for the fourth quarter, according to analysts polled by Reuters, compared to a profit of 1 billion a year earlier.

However, analysts see Siemens approaching the break-even point for the first quarter.   

Last month, the company said the mobile phone market was showing signs of recovery and that should help the company cut its losses in 2002, after shedding 17,000 jobs last year.

"But we are confident that we have the right strategies and that our restructuring measures will bear substantial fruit this year," Chief Executive Heinrich von Pierer said last month. "I expect a very good quarter as far as unit sales go."

Ericsson, the biggest supplier of third generation wireless infrastructure, is expected to report a $418 million fourth-quarter loss on Friday. Analysts also see the company posting its first ever annual pre-tax loss, of about $2.8 billion.

In the third quarter, the company reported a larger-than-expected pre-tax loss of 5.8 billion Swedish crowns (about $550 million). That compares with a profit of 4.4 billion crowns in the same period a year earlier.

The company, in an effort to become profitable, launched a major  restructuring programme last year. It cut 22,000 jobs and created a separate handset division in a joint venture with Japan's consumer electronics firm Sony.

"We now anticipate that the difficult market conditions will persist well into next year," Chief Executive Kurt Hellstrom said when the company posted its last quarterly results.