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Nokia Reports Lower Profits, Loss of Major Market Share in United States

Posted on: Friday, 15 October 2004, 06:00 CDT

Oct. 15--Nokia's upbeat projections for third-quarter earnings were deflated Thursday when the company reported a dip in quarterly profit.

The company attributed the fall to its price cuts for handsets, an effort to regain market share.

The company, whose Americas unit is based in Irving, said it lost major market share in its largest market, the United States, for the third quarter. But the losses were offset by gains in Europe, and Nokia said it improved its worldwide market share to 33 percent from about 29 percent. The company did not specify market share figures for the United States.

Jorma Ollila, chairman and chief executive, attributed the quarterly loss to American cellphone industry's volatility. The U.S. cellular network runs on CDMA, which differs from the worldwide standard of GSM.

Dealing with the two technologies and fierce competition among wireless providers contributed to the slump, Ollila said during a conference call with analysts.

Market share in the United States fluctuates and progress toward gaining market share will be slow, Ollila said.

"It will take a bit of time before we can say we are in full force as we should be in that marketplace," he said.

The world's largest handset maker said its third-quarter net profit dropped to about $817 million, or 17 cents per share of common stock, from $1 billion, or 21 cents, for the same quarter in 2003. Nokia still beat analysts' estimates of 10-12 cents per share.

Nokia's shares rose 22 cents to $14.22 Thursday on the New York Stock Exchange.

Nokia surprised industry insiders this year when it reported a drop in market share, after competitors such as Motorola and Samsung made gains with new designs such as clamshell and camera phones.

Nokia's third-quarter net sales increased slightly to about $8.6 billion for the third quarter, from about $8.4 billion for the same quarter in 2003.

"It's hard to say that Nokia made a mistake," said Albert Lin, telecom analyst with American Technology Research. "The company is so large that it cannot be on the leading edge of every innovation."

Lin said that although the numbers were not exciting, they indicated that Nokia was coming back from a difficult period.

Nokia predicted global handset sales to total 630 million by year's end, up from its previous prediction of 600 million.

For the fourth quarter, the company said it expected sales of $10.4 billion to $10.6 billion, down from $10.9 billion in the same period last year.

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