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The BBC's Rory Cellan-Jones
"A worrying sign not just for this industry but for the global economy as a whole"
 real 56k

The BBC's Andrew Walker
"Nokia has previously been much less affected by bad news about the mobile phone business than its main rivals"
 real 28k

Tuesday, 12 June, 2001, 16:35 GMT 17:35 UK
Nokia issues surprise profit warning
Nokia concept 3G terminal
Nokia had been thought more resilient to slowdown than some of its rivals
Nokia, the world's largest maker of mobile phones, has surprised markets with a warning that profits will be much less than earlier expected.

The Finnish company said slower than expected market growth meant it would now make 0.15-0.17 euros a share profit in the second quarter of its business year compared with earlier expectations of 0.20 euros.

It said the market had deteriorated because of economic uncertainty, the transition to the mobile internet and less aggressive marketing by telecoms operators.

Nokia shares plunged more than 20% soon after the announcement was made, wiping 37bn euros ($31bn; 23bn) off the company's market value.

Better placed?

Nokia, which has about one third of the global market for mobile phones, had been thought better placed than most of its rivals to weather global economic slowdown.

Its mobile phone production business has been increasing market share while competitors including Ericsson, Motorola and Alcatel have been forced into far-reaching reassessments of strategy.

Nokia's strength in the handset market has also given it the financial muscle to make a deeper push into network infrastructure markets.

Unlike some of its rivals, it has been able to support the type of vendor-financing arrangements that debt-laden telecoms operators are increasingly demanding from equipment suppliers.

Analysts said Tuesday's profit warning was a rude awakening for investors, many of whom had previously considered Nokia a telecoms "safe haven", immune from industry-wide troubles.

It was this "shock factor" that caused such a steep fall in the share price, they said.

'Very modest' growth

In a statement, Nokia also reduced estimates for second-quarter sales growth year-on-year to less than 10% from a previous 20%.

The company said it expected the market slowdown to continue and it would issue a new forecast for the second half of its business year on 19 July.

It said the global mobile phone market would show only "very modest" growth this year, with second-half growth much stronger than that in the first half.

"We have intensified our efforts to counter changing market conditions...[which] in combination with our current financial health and proven performance, should enable us to exit the current slowdown in a stronger position than before," said chairman and chief executive Jorma Ollila.

"We will, together with our operator customers, continue the implementation of the new technologies with full speed in order to support the transition into next generation services."

Nokia shares traded in Helsinki closed at 26.55 euros, down 23% on the day.

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See also:

20 Apr 01 | Business
Why Nokia is winning the phone war
20 Apr 01 | Business
Nokia profits up 6%
03 Apr 01 | Business
Nokia seeks to hurry 3G launches
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Nokia to build UK 3G network
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Ericsson and Nokia cut jobs
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Nokia lowers sales forecast
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Nokia results send shares into spin
05 Jan 01 | Business
Nokia increases market share
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