Nokia Gets EDGEy

While Nokia Corp.'s (NYSE: NOK) upswing in profits took the headlines yesterday (see Nokia's Q3 Sunshine and Nokia Reports Q3), of equal interest to Unstrung was its update on the delivery of EDGE (enhanced data for GSM evolution) infrastructure and handsets.

The Finnish cash machine says it has delivered "EDGE-capable GSM network equipment to 23 operators across all GSM frequencies in all continents." While U.S. carriers such as Cingular Wireless and AT&T Wireless Services Inc. (NYSE: AWE) have publicly committed to deploying EDGE equipment, Nokia will "not specify any operator by name," says Nokia Networks spokeswoman Tuula Putkinen. "We have volume deliveries in Asia and Europe but no customers have gone public," she adds.

And Nokia would not expand on its announcement that GSM/EDGE handsets would be shipped in 2002," while tri-mode GSM/EDGE/WCDMA handsets would be available in 2003 or 2004.

Past experience suggests that the words "shipped" and "available" can be interpreted in any number of ways (see 3G Redefined, Finnish Style).

During the results conference call Thursday, Nokia chairman and CEO Jorma Ollila stated that "deliveries of GSM/EDGE equipment was going well," and reiterated the company's claim to be the first vendor to ship EDGE hardware in volume. He also said that Nokia "expects nearly all of our 100 or so GSM customers to deploy EDGE." To what extent and when was not mentioned.

EDGE is an enhancement to the GSM and TDMA wireless communications systems that increases data throughput up to 384 kbit/s. EDGE uses the same basic network structure as existing 2G technologies.

Nokia also booked its first revenues from WCDMA infrastructure -- €430 million for singlemode systems delivered to Austria, Japan, Sweden, and the U.K. The company says it has commitments for 3G systems from 25 carriers, while another 17 are still in trials.

The handset domain, though, is still Nokia's stronghold (see Nokia Extends Handset Share), with 80 percent of revenues and 90 percent of profits coming from the mobile phones business. The company sold 37 million of the market total of 103 million units in the third quarter, with sales particularly strong in Asia and Europe. With total handset sales increasing quarter on quarter -- the first quarter recorded 89 million, the second 95 million -- Nokia expects the year's sales for all mobile phones to reach the 400 million mark. So keep an eye on whether total fourth-quarter sales rise further, to 113 million or more.

The financials and handset sales impressed Standard & Poor’s, which is retaining its rating (A) and outlook (stable). An S&P update noted: "Although business risk is relatively high in the handset market, owing to short product life cycles and high technology risk, Nokia has continued to increase its market share to more than 38% and continues to generate solid and improving margins in its handset business." (See S&P Affirms Nokia Ratings.)

Notably, Ericsson AB (Nasdaq: ERICY) has a slightly more cautious view of the market. It believes "that approximately 92 million mobile phones were shipped in the second quarter and approximately 100 million in the third quarter. We had previously estimated 85 million units for the second quarter. Our full-year market estimate is about 390 million units."

— Ray Le Maistre, European Editor, Unstrung
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