Nokia results send shares into spin

Shares in Nokia, the world's largest mobile phone maker, tumbled on Tuesday as investors took fright at lowered predictions for sales in the first three months of this year.

The falls came in heavy trade and highlighted the volatility of telecoms shares.

In a statement heard line-by-line by analysts and investors across the world, the Finnish company first reported a 39% rise in pre-tax profit to 1.77bn euros ($1.62bn; £1.11bn) for the fourth quarter of 2000.

This news sent the shares up more than 7% on the day.

But within a couple of minutes Nokia went on to say it expected sales growth of 25-30% in the first quarter of 2001 compared with previous expectations of 25-35% growth.

Veiled profits warning

Analysts interpreted this as a veiled profits warning and the shares immediately went into reverse.

At the close of trading in Helsinki, the shares stood at 37.12 euros, down 6.85% from Monday's close but up slightly from the 35.9 euro intra-day low.

Their lifetime high of 65 euros was in June 2000.

Nokia attributed its revised forecast to uncertainty about economic growth prospects worldwide but particularly in the United States.

"It's just not possible to predict in the same way as it was in previous years," chief executive Jorma Ollilla said.

"How will (a slowdown) affect consumer behaviour, in terms of replacement (phone) demand, in terms of how aggressive operators are, these are factors which are beyond our control or beyond our normal forecasting parameters.

"There are more 'don't knows' than there were before."

Dramatic change

Analysts had said they expected Nokia's results to reflect a slowdown in global handset sales.

But their view was that the company should be better placed to weather the downturn than most of its competitors.

Their main focus was on whether Nokia was predicting a temporary slowdown lasting one or two quarters or something more permanent.

Tuesday's share price fall indicated that analysts had hoped for a more upbeat outlook.

Earlier this month, Nokia said it had sold 128 million handsets in 2000 in another disappointment for analysts, who had forecast sales of 135 million-140 million.

Mobile phone makers: Market share, Q3 2000

Nokia 30.6%

Motorola 13.3%

Ericsson 9.7%

Siemens 8.6%

Alcatel 5.6%

Panasonic 5.4%

Others 26.8%

Source: Gartner Dataquest

Weaker sales have now led manufacturers to offer heavy discounts, reduce sales targets and accept lower margins, analysts said.

"The market has changed dramatically in a very short space of time. There is no way Nokia can avoid that," BNP Paribas analyst David Thwaites said.

However, analysts said Nokia remained in a much stronger position in the short term, as market leader, than most of its rivals.

Bigger threat

Motorola and Ericsson, the world's number two and three mobile phone makers, have both been performing poorly.

Last week, Ericsson said it was outsourcing mobile phone production after the division reported deep losses.

In the longer term, some of the so-called second-tier manufacturers might combine resources and become a bigger threat to Nokia.

Nokia downgraded its estimate for the global mobile phone market in 2001 to 500 million-550 million units, down from a previous 550 million.

It also said it was delaying to the third quarter of this year the launch of its general packet radio service (GPRS) mobile phone, which will provide high-speed "always on" internet access.

But Nokia said it was maintaining its predictions for first-half 2001 sales growth in the upper range of 25-35% and full-year 2001 through 2003 growth of 25-35% with continued high profitability.

European rivals Siemens and Alcatel - fourth and fifth placed worldwide respectively - are due to report results on Wednesday.