Nokia tops expectations, warns on Q1

23-01-2003

by Andrew McLindon

Nokia, the world's largest mobile phone maker, posted better than expected fourth quarter profits on Thursday, but warned that first quarter sales would be weak.

Nokia said that net profit in the quarter increased by a whopping 132 percent to EUR1.05 billion, with diluted earnings per share of EUR0.22. It increased net sales by 1 percent year-on-year in Q4 to EUR8.84 billion.

However, it said that sales growth for the group in the first quarter would be lower than the 0 percent to 9 percent increase in sales estimated for the handset unit.

The fourth quarter did however see record sales volumes of 46 million units, which according to the Finnish firm, gave it its highest ever market share at 39 percent. This is more than double its nearest rival, Motorola, and is the fifth year in a row that Nokia has increased market share. But, sales of new colour-screen phones were not as good as expected in the run-up to Christmas as consumers mainly opted for cheaper models.

For the full-year, Nokia saw net sales fall 4 percent to EUR30.02 billion, but net profit was up 54 percent to EUR3.4 billion and reported diluted earnings per share increased to EUR0.71.

The company's mobile phone unit continued to outperform Nokia Networks, which produces the infrastructure equipment necessary to build a mobile phone network. For the full year, the mobile phone unit produced an improvement in operating profit of 14 percent, compared to a fall of 61 percent for the network arm.

Although the Networks division achieved a slight increase in market share during 2002, the contraction of the overall market by around 20 percent saw its sales decline by 13 percent. Nokia said it did not expect the situation to improve in 2003 with the overall market set to decrease by between 5 percent and 10 percent.

In comparison, Nokia said that the mobile phone sector returned to growth in terms of overall market volume in 2002 after a sluggish 2001. The total market grew 5 percent in 2002, estimated Nokia, with Nokia achieving volume market growth of 9 percent, but full-year sales for its handset unit remained flat. Nokia said that total mobile phone market volume growth in 2003 should be around 10 percent.

Nokia Chairman and Chief Executive Officer Jorma Ollila said that the company would be looking to again increase its market share in 2003 as the mobile market moved into a new phase of advanced features and services, driven by colour screens, imaging, messaging and mobile games.

Nokia shares were up by nearly 2 percent at Thursday mid-day to SEK132.50 on Stockholm stock market. Its share price has nearly halved over the last 12 months, but has performed better than many of its rivals.