Finland's Nokia cuts sales again

Nokia's share of global handset sales expected to decline

HELSINKI, Finland (CNN) -- Nokia, the world's biggest mobile phone maker, has issued its second sales warning in as many weeks, amid reluctance by consumers and telecom operators to spend money on upgrading handsets and infrastructure.

The Finnish company on Thursday lowered its forecast for second-half sales growth to at least 10 percent from an earlier forecast of up to 15 percent, but said it was confident of long-term growth of more than 10 percent.

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.

Telecom operators, who spent more than $100 billion to buy high-speed mobile phone licences, have slashed spending on new infrastructure that carries wireless signals to and from mobile phones in order cut debt and restore investor confidence.

"Nokia top management was confident on the growth and development of the mobile communications industry, setting new long-term annual sales and earnings growth targets of more than 10 percent from 2003,'' Nokia said in a strategy update.

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Nokia said it was sticking to its earlier forecast for the global mobile handset market to grow to between 400 million and 420 million units this year from last year's total of some 380 million. It also repeated that it plans to snatch global market share of 40 percent.

But investment bank Merrill Lynch has already 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.

Nokia said it could match its estimates as it releases new mobile phones.

"Expectations for second-half sales growth are underpinned by management confidence in the appeal of the record 30 new phone models scheduled for shipment for 2002,'' Nokia said.

"By the end of this year, Nokia expects to have shipped 10 colour-screen models while approximately half of all Nokia's mobile phone deliveries planned to be MMS [Multimedia Message Services] enabled."

The downgrade came as part of Nokia's mid-year strategy update, including a presentation to analysts from Chief Executive Jorma Ollila, handset division head Matti Alahuhta and Networks chief Sari Baldauf among others.

Ollila said: "We are facing a very challenging economic situation globally. From mid-January 2001 until the last couple of months we have been under a lot of uncertainty as to how this industry will evolve. I think we have a better understanding of how we can drive our own business and where the value will lie.''

Nokia said it remained comfortable with its earlier stated guidance for full-year pro-forma diluted earnings-per-share of 0.83 euros.

"Consensus was 75-77 cents, because people were expecting another profit warning, so 83 cents is above market expectations,'' Nigel Cobby, managing director at Deutsche Bank in London, told Reuters.

"It's the 10 percent sales growth that people will be focusing on though. The question will be have they gone ex-growth?'' he added.

Nokia's stock initially rose more than 3 percent on relief it had not issued a profits warning. But in midday trading, the stock fell 3.3 percent to 12.91 euros.

Last week, the company said second-quarter net sales would decline by about 2-6 percent to about 6.9-7.2 billion euros. (Full story)

Nokia issues full second-quarter earnings on July 18.