[an error occurred while processing this directive]
BBC News
watch One-Minute World News
Last Updated: Thursday, 17 July, 2003, 10:33 GMT 11:33 UK
Nokia profits sharply down
Nokia phones
Profits are down sharply at the world's leading mobile phone maker Nokia.

The Finnish company blamed weak global economies and the fall in the value of the dollar.

It reported a 28% fall in profits - to 624m euros (439m; $701m) - in the three months to the end of June, compared with the same quarter last year.

It also warned of flat or lower sales at both its handset and mobile network divisions over the next quarter and lower profits.

Shares plummet

The second quarter profit drop was largely down to a one-off writedown at Nokia's ailing networks division.

It's the handset news for the third quarter that looks a bit of a disaster
Share trader
Nokia took a charge of 399m euros (280m; $443m) to cover the cost of closing network research and development units and redundancies.

The results were in line with analysts' expectations.

But the gloomy outlook led to a sell-off of Nokia shares, which were down 1.15 euros, or 7.37%, at 14.6 euros, on the Helsinki exchange.

Nokia said handset sales were up 2%, well below its own predicted figure of just below 4%.

But the company said it had managed to hang on to its commanding lead in global market share, with 39% of mobile phone sales.

Grim conditions

Nearest rival Motorola failed to give its usual estimate of market share with its latest set of results earlier this week, leading analysts to speculate it had lost ground.

Motorola's data confirmed the grim conditions in the world's largest mobile phone market, China, with large numbers of unsold handsets because of worries about the SARS virus which slowed down business there in the quarter.

On Tuesday, loss-making handset maker Sony Ericsson said it had gained market share - to 6.4%, with handset sales in Europe offsetting weakness in China.

The firm said it would edge into profit for the first time later in the year.

Sweden's Ericsson, which mainly supplies network equipment, publishes its profit figures on Friday, but its shares dived in afternoon trade on Thursday following Nokia's downbeat forecast.

'Disaster'

Nokia said it saw no improvement in its networks division going forward, with sales projected to decline by 15 to 20% in the next quarter.

But it was the firm's forecast of flat or declining handset sales that most alarmed the markets.

"It's the handset news for the third quarter that looks a bit of a disaster," one trader commented.

"They are now looking for sales to be flat to slightly down in the third quarter, while we were looking for growth of 6% to 8%."

Margins 'hold up'

Raj Karia, telecoms analyst at Canaccord, said: "Nokia's results were disappointing.

"Second-quarter mobile phone sales were lower than I had expected and this is compounded by weakness in other areas.

"Margins held up quite well but the growth in Asian markets that everyone was expecting has not come through."

He said Nokia was not selling as many top of the range phones as expected.

Michael Schroder, analyst at Opstock Securities, also said the results were disappointing.

"It seems that volumes are growing, but not turnover.

"It means that the average selling price is not growing."


WATCH AND LISTEN
The BBC's Nicole Goebel
"Eight out of ten Europeans and more than half of Americans already own a handset"



SEE ALSO:
Motorola squeezes out profit
15 Jul 03  |  Business
Shares hit as 3G price war starts
06 Jun 03  |  Business
Nokia hangs on to its lead
17 Apr 03  |  Business
Nokia warning hits tech stocks
11 Mar 03  |  Business


RELATED INTERNET LINKS:
The BBC is not responsible for the content of external internet sites


PRODUCTS AND SERVICES

News Front Page | Africa | Americas | Asia-Pacific | Europe | Middle East | South Asia
UK | Business | Entertainment | Science/Nature | Technology | Health
Have Your Say | In Pictures | Week at a Glance | Country Profiles | In Depth | Programmes
Americas Africa Europe Middle East South Asia Asia Pacific