Nokia warns of slower growth

Finnish mobile phone giant Nokia says falling demand has hurt profits

HELSINKI, Finland (CNN) -- Nokia, the world's largest mobile phone maker, warned on Thursday that sales would decline this year as weak demand for handsets and networks continues.

Nokia cut its sales growth outlook for 2002 to between 4 and 9 percent, down from its previous forecast of 15 percent. However, the company expects the market to begin turning around in the coming months.

"The first quarter seems to be the bottom of the industry," Chief Executive Jorma Ollila told CNN. "Unforunately, it's been a slower recovery in our view than what we saw a few months ago... that's because the rebound of the economy has been slower."

Nokia's stock plunged 10.6 percent to 20.98 euros in midday Helsinki trading on Thursday.

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Thursday's sales warning came as the Finnish company reported first-quarter net sales fell 12 percent to 7.01 billion euros. Network sales dropped 29 percent in the quarter, while handset sales fell 7 percent.

Nokia, which has a 37 percent share of the mobile phone handset market, said it was lowering its estimates for 2002 industry-wide handset sales to between 400 and 420 million units. It had expected sales of about 420 million to 440 million units.

"The reduced forecast for the handset market is a surprise at this stage of the year...they are pulling back their own sales growth, and I would have thought they wouldn't need to do that until later in the year,'' Susan Anthony, an analyst at Credit Lyonnais, told Reuters.

Nokia, like other mobile phone makers, is struggling to sell wireless infrastructure to mobile phone operators. European mobile phone companies spent more than $100 billion on buying licences to operate high-speed third-generation (3G) services, which allow high quality video streaming and Internet services over handsets.

But many are now delaying the introduction of 3G services as they attempt to slash debt mountains built up during the telecom boom of 2000. The global economic slowdown has not helped matters.

At the same time, handset sales have stagnated as consumers await 3G services. Mobile phone companies have attempted to compensate with funkier phones with colour screens and cameras but as yet there seem to be little appetite.

Nokia also said net income in the three months to March 31 fell 13 percent to 863 million euros ($768 million), down from 974 million a year earlier. It said earnings per share was 0.18 cents in the first quarter, compared to 0.20 cents a year earlier.

On a pro-forma basis -- minus acquisitions and one-time costs -- Nokia said first-quarter profit totalled 915 million euros, down from 1.05 billion year earlier. Pro-forma earnings per share was 0.19 cents, compared to 0.22 cents in the first quarter of 2001.

Last month, Nokia said it would meet or exceed its earnings-per-share guidance of 0.15 to 0.17 euros. But it also said group sales would drop below its earlier guidance for a fall of 6 to 10 percent year-on-year. It forecast declines of 25 percent in networks and a 3 to 7 percent in handsets.

The company has seen its profits slip as demand for mobile products declined.

Nokia is now pinning its hopes on multimedia messaging services (MMS), with sound and pictures, beyond plain text messaging.