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Nokia Posts Decline in First-Quarter Sales, Sees Lower Earnings

Posted on: Tuesday, 6 April 2004, 06:00 CDT

Apr. 7--Nokia, the world's biggest cellphone maker, missed the public's growing fondness for folding, clamshell-style cellphones in the first quarter and paid for it in lower earnings.

In response, investors pummeled the company's stock Tuesday on the New York Stock Exchange, knocking its price down $3.94, or nearly 19 percent, to $17.21 a share. Trading was about nine times normal daily volume.

Nokia, based in Finland said its first-quarter sales were down 2 percent, at odds with the company's forecast in January of sales gains of 3 percent to 7 percent. First-quarter net profit of 17 cents per share of common stock was down from 21 cents a year earlier and well short of Wall Street's expectation of 24 cents a share.

"It's a stumble for the quarter. But I don't think the sky is falling," said Ren Zamora, who follows Nokia for Loop Capital Markets in Chicago. "There were a lot of high expectations, and now that you've let some air out of the balloon, they're getting punished."

Before Tuesday, the stock price had been up nearly 27 percent this year. Despite the shortfall, Nokia said it sold about 19 percent more cellphones than during the same quarter last year, but the industry overall had about 25 percent growth.

Nokia employs about 1,200 at its Alliance Airport area distribution center, and its headquarters for the Americas is in Irving. Spokesman Keith Nowak said, "There isn't really any impact" on local employment as a result of the first-quarter results.

According to a recent Gartner Group survey, Nokia makes about 35 percent of the world's cellphones, more than double No. 2 Motorola. Some Wall Street analysts said the first-quarter glitch trimmed as much as 4 percentage points off that market share, which the company hotly disputed without offering an estimate.

"I figure they did lose a couple of percentage points," Zamora said. Cellphones account for about 80 percent of Nokia's revenues, which totaled $7.9 billion in the first quarter.

In a conference call with investment analysts, Nokia Chairman Jorma Ollila acknowledged that the company was particularly uncompetitive in meeting demand for new clamshell phones. But he noted that the company introduced seven phone models in the first quarter and should introduce 40 this year.

Ollila also said revenues in Nokia's unit that makes cellphone base stations were higher than expected at $1.7 billion, with strong profit margins. Another unit that makes phones for corporate use also did better than expected.

The company said it will report its complete first-quarter earnings April 16, when it will also offer a second-quarter outlook.

Chris Bulkey, who follows the company for Technology Research Group in Westchester, Pa., said that with about $14.6 billion in cash and securities on its balance sheet, Nokia can weather this storm.

"Nokia had a little warning, but they're strong," Bulkey said. He said the company has generally been conservative in its earnings reporting and management's credibility shouldn't suffer too much because of a disappointing quarter.

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(c) 2004, Fort Worth Star-Telegram, Texas. Distributed by Knight Ridder/Tribune Business News.

NOK, MOT, IT,

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