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Nokia sees a 2% slide in its sales Market share in U.S. and Europe stagnates

Posted on: Wednesday, 7 April 2004, 06:00 CDT

Nokia, the world's largest mobile phone maker, estimated on Tuesday that its first-quarter sales fell 2 percent, surprising investors and analysts who had predicted growth for the quarter.

The company, based in Espoo, Finland, said it failed to increase its market share in North America and Europe because consumers preferred competitors' products to its own products, particularly midrange, clamshell-shaped phones.

We have not been able to grow with the market in the United States and Europe, where our share has been very strong, said Jorma Ollila, the company's chairman and chief executive, during a conference call with analysts.

Mobile phone manufacturers have been jockeying for position in an increasingly saturated global market. The swift introduction of a newly shaped phone, or one with an added feature like a camera, can give a manufacturer an instant increase in market share if consumers decide the design is a must-have. Industrywide, cellphone sales grew 25 percent in the first quarter, Nokia estimated, but it said sales at Nokia grew only 19 percent.

They took their eye off the ball when it comes to their phone portfolio, said James Crawshaw, an analyst with Commerzbank Securities in London. Nokia probably gave up market share to Samsung, one of its rivals, Crawshaw said.

The sales warning came as a shock to analysts and investors, particularly because Nokia had surprised them a quarter ago by reporting better-than-expected earnings.

The company's stock dropped 17 percent on the Helsinki exchange, to close down 2.92 at 14.43, or $17.46, on Tuesday.

Net sales for the first quarter will be 6.6 billion, Nokia said, rather than a previously predicted increase of as much 7 percent from the first quarter of 2003, when sales were 6.77 billion. Earnings per share are expected to be 17 cents, Nokia said, down from analysts' estimates of about 21 cents.

Nokia did not break out the decline in the mobile phone unit alone, but said the results would be tempered by growth of 16 percent in its networks division, to 1.4 billion. It's always a trade-off between having too many phones or too few phones, Crawshaw said, and up until now Nokia has managed that balance very well. Ollila has said that Nokia will introduce a total of 40 phone models this year, but analysts said that the mere introduction of new products does not ensure that Nokia's market share will start to grow again. Nokia announces its official first-quarter results on April 16.

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