Nokia reports lower first-quarter profit, lowers sales forecast

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Posted 1:22PM on Thursday, April 18, 2002

HELSINKI, Finland - Nokia, the world's largest cell phone maker, reported its profit and sales fell in the first quarter and slashed its forecast of sales growth for the rest of the year, sending its share price down more than 12 percent. The first-quarter results were in line with market expectations, but the forecast of slower sales growth for the year underscored the problem facing telecommunications equipment manufacturers as debt-burdened operators have cut spending. Nokia also announced Thursday it will lay off more than 600 people at its plant near Dallas that employs 1,600 workers. For the January-March period, Nokia said its profit fell 8.5 percent to 915 million euros ($805 million) from 1 billion euros a year earlier. Net sales fell 12 percent to 7 billion euros ($6.2 billion) from 8 billion euros in the same period last year. Chief Executive Jorma Ollila said Nokia retained a 37 percent market share of global mobile phone sales and reiterated its 40 percent target. He said the company performed better than expected during the first quarter, when "it saw a bottom in the industry." "The following three quarters will be better from our point of view, ... but the recovery will be slower than what we foresaw," Ollila said. Nokia said it expects its sales to increase 4 percent to 9 percent this year, rather than its previous forecast of 15 percent. It also lowered its estimate for total global handset sales in 2002 to between 400 million and 420 million units, from an earlier forecast of more than 420 million. Nokia shares dropped 12.6 percent to close at 20.49 euros ($18.03) on the Helsinki Stock Exchange as investors were disappointed by the warning of lower sales growth. "Turnover is an uncompromising measure of performance," said Jussi Hyoty, chief analyst at FIM Securities. "One wonders about Nokia's competitiveness; it's not going so well for this company now." Hyoty said Nokia was unlikely to achieve its goal of capturing 40 percent of the global handset market with its current performance. Earnings per share were 0.19 euros (16 cents), down from 0.22 euros a year earlier, the company said. It predicted that earnings per share in the second quarter would be between 0.18 euros to 0.20 euros (16 cents to 17.5 cents). Nokia's mobile phone handset sales fell 7 percent to 5.4 billion euros ($4.7 billion)in the first quarter while sales of phone network gear fell by 29 percent to 1.4 billion euros ($1.2 billion). Ollila said that Nokia will introduce its first third-generation, or 3G, mobile phones in September as planned. Networks using 3G technology, also known as the Universal Mobile Telephone System, offer transmission speeds nearly 40 times greater than existing standards and provide access to Internet services, video and e-mail. Last year, Nokia group's net profit was 2.2 billion euros ($1.9 billion), down 44 percent from 3.9 billion euros in 2000, on net sales of 31.1 billion euros ($27.6 billion). Nokia is based in Espoo just outside Helsinki. It has operations in 130 countries with more than 50,000 employees. ------ On the Net: Nokia site: http://www.nokia.com