Nokia profits up 6%

Sales expectations have been downgraded

The world's largest mobile phone maker, Nokia, has posted better than expected first-quarter profits.

But the Finnish company has cut its sales and profit outlook for the remainder of 2001 in the face of tough market conditions.

The results come as rival Ericsson announces 12,000 jobs cuts worldwide, following higher than expected first quarter losses of 4.9 billion Swedish crowns (£333m).

By contrast, Nokia posted pre-tax profits of $1.25bn (£863m) in the three months to 31 March, a 6.1% increase on the same period last year.

Slowing economy

The result helped push Nokia shares up 5% to 35.25 euros in early Helsinki trade, although the price fell back into negative territory mid-morning.

The company's shares remain well down on highs of about 65 euros reached last year.

Nokia said net sales rose to eight billion euros in the quarter from 6.54bn euros in the same period last year.

However, the slowing economy, particularly in the United States, increased handset price competition.

The fact many of its markets were reaching maturity was also having an impact, the company admitted.

Mika Paloranta, an analyst at Finland's largest brokerage ArosMaizels said: "[The results] look rather good. The first quarter was clearly better than expected.

"The problem is the guidance for the full year. They've lowered their view to [sales] growth of 20% from the earlier 25-35% - that's possibly lower than the market consensus."

3G costs

The company cut its sales growth outlook to 20% for both the second quarter and full year 2001.

It also trimmed the operating margin outlook for 2001 for its crucial handset division to a target of "high teens" from earlier expectations of reaching a margin of 20% in the fourth quarter at the latest.

For its networks division - Nokia's second biggest revenue generator - it kept its target of operating margins in the high teens.

Nokia chairman and CEO Jorma Ollila calmed fears at the explosion in 3G mobile phone costs.

He said the company was being "very prudent" in its financing of 3G rollout.

And he was bullish about Nokia's move into mobile telecom infrastructure, predicting it would become the market leader within a few quarters.

Last month Nokia secured contracts to build third generation networks in France, Germany, Australia and the UK worth 2.5bn euros (£1.55bn, $2.21bn).