Nokia cuts sales target

Nokia's share of global handset sales expected to decline

HELSINKI, Finland (CNN) -- Nokia, the world's biggest mobile phone maker, cut its sales revenue target due to a weak handset market and a reluctance by telecom operators to spend money.

The company said on Tuesday second-quarter net sales would decline by about 2-6 percent to about 6.9-7.2 billion euros. Chief Executive Jorma Ollila had said previously sales in the April-June quarter would grow between 2 and 7 percent from 7.35 billion euros ($7 billion) a year ago.

Nokia, which has seen its stock tumble by more than half this year, is facing stiff competition from rivals. However, handset sales are stagnating, particularly in Europe, as consumers await the launch of high-speed mobile phone services.

Handset sales are expected to grow by 0-4 percent year-on-year, instead of the previously stated 5-10 percent, Nokia said on Tuesday, and network sales to telecom operators are forecast to decrease by 20-25 percent, compared with an earlier guidance of a decline of 5-10 percent year-on-year.

"The [telecom] companies simply are just not spending on networks right now because they're short of cash," Richard Windsor, an analyst at Nomura International, told CNN.

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Nokia said it was on track to meet its pro forma earnings per share target of 0.18- 0.20 euros ($0.17-0.19) in the April-June quarter, up from 0.17 euros in the year-ago period.

The company's stock initially fell more than 3 percent on Tuesday but rebounded to gain more than 7 percent to around 14.25 euros in afternoon trading.

"The news wasn't so negative after all. It looks terrifying on sales but we knew networks were bad and mobile phones weren't so disappointing,'' Jussi Uskola, analyst at investment bank Nordea Securities, which rates Nokia a "buy,'' told Reuters.

Nokia's stock has come under pressure from rival Ericsson's latest gloomy outlook for the industry. Ericsson Chief Executive Kurt Hellstrom told the Financial Times that demand for mobile phone equipment from debt-laden telecom operators may not improve this year.

Nokia issues full second-quarter earnings on July 18.

Investment bank Merrill Lynch on Monday cut its forecast for global handset sales in 2002 by 6 percent to 385 millions units, and reduced its estimate by 11 percent to 410 million units in 2003.

It also cut its estimate of Nokia's share of the handset market to 35 percent this year from 37 percent in 2001. Merrill predicted Nokia's share would fall to 34 percent in 2003 and to 33 percent in 2004.

Merrill said Nokia faces stiff competition in Europe from Samsung and Siemens, while Motorola is pressuring its sales in China.

"The fundamentals in the mobile handset environment do not appear to be improving. In fact, recent news from component suppliers all point towards order push outs and delays in the release of new handsets," Merrill said in a research note.