Nokia Bucks Network Forecasts

Nokia Corp.’s (NYSE: NOK) mid-quarter guidance of a 0 to 5 percent decrease in sales at its network division for the second quarter of 2003 has received a positive reaction from the financial sector in light of previous downbeat market expectations (see Nokia to Hit Q2 EPS Guidance ).

The forecast challenges chief executive Jorma Ollila’s belief in April that the wireless infrastructure market as a whole is set to decline by 15 percent or more in 2003 (see Finns Flummoxed, Flopping ).

CFO Olli-Pekka Kallasvuo told analysts in a conference call today that, although the latest forecast should not be regarded as indication of any sudden recovery in the market, pro forma operating profit within the network division would also be “close to break even in the second quarter,” excluding recent restructuring charges of €350 million to €400 million (US$409 million to $468 million) (see More Finns Finished).

Financial analysts have reacted positively to the network division’s news.

“Clearly the market was looking for a sales decline around 10 to 15 percent, so this is a lot stronger than I had anticipated,” comments Haakan Wranne, telecom analyst at Fischer Partners Fondkommission AB. “The European market looks a little stronger than it has during the last several quarters. There is a clear uptake for Nokia compared to its Q1 results. If Ericsson can deliver on this too, everyone will be happy.”

“This quarter’s update had encouraging networks development,” write Lehman Brothers analysts. “We had been expecting a 10 percent y-o-y decline while consensus was looking for a 13 percent y-o-y decline, so it appears that Networks’ top line will be significantly ahead of expectation.”

"Nokia Networks (NN) is at last showing signs of stabilisation," adds Nomura Holdings Inc.'s Richard Windsor. "Revenue declines appear to have slowed dramatically to -8% YoY giving an increase of 11% QoQ for Q3 2003. We are beginning to have confidence in our assumption that Nokia will return NN to break-even by the end of the year." Nokia shares fell 51 cents (2.8 percent) to $17.45 in active trading on the New York Stock Exchange today. However, this drop can be attributed to the company's announcement that mobile phone sales growth will be at the low end of, or below, an earlier forecast of four to 12 percent, coupled with a fall in pro forma diluted earnings per share from €0.19 ($0.22) to between €0.13 ($0.15) and €0.16 ($0.19).

Nokia's upbeat network news provided a shot in the arm for pure network player and chief rival Telefonaktiebolaget LM Ericsson (Nasdaq: ERICD), whose shares rose 82 cents to $11.15, or nearly 8 percent, on the Nasdaq.

Nokia is set to publish its second quarter 2003 results on July 17.

— Justin Springham, Senior Editor, Europe, Unstrung

Be the first to post a comment regarding this story.
Sign In