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Nokia Slumps on Q2 Results

Nokia Corp.'s (NYSE: NOK) share price took a nosedive this morning on the back of a 5 percent fall in second-quarter net sales (see Nokia Q2 Sales Fall 5%).

The Finnish vendor reported net sales of €6.6 billion (US$8.2 billion), causing its stock to plummet 14 percent (€9.78/$12.10 a share) at press time.

Total operating profit was €907 million ($1.1 billion).

Nokia’s disappointing set of figures was largely due to a sharp fall in demand for its handsets. Net sales at its mobile phone division fell 13 percent year-on-year to €4.2 billion ($5.2 billion).

Such downbeat results have taken the shine off the company’s continued improvements in its networks business.

Network sales rose 6 percent year-on-year to €1.6 billion ($2 billion), generating an operating profit of €255 million ($315 million). Most impressive was a 16.2 percent operating margin, a result CEO Jorma Ollila was keen to talk up in the vendor’s conference call with analysts.

“A year or five quarters ago I said that 15 percent-plus operating margins in the network business would be very challenging to achieve. And here we are.”

Ollila added that Nokia “is now rolling out 3G networks to 27 operators in 16 countries,” claiming that the vendor supplies kit to 17 of the 37 carriers commercially operating W-CDMA networks.

Looking ahead, Ollila expects the infrastructure market to continue its recovery, though no specific figure for growth was forecast. “Nokia continues to believe that the infrastructure market in 2004 will be slightly up compared to last year, in euro terms.”

Analysts at Lehman Brothers believe Nokia’s success in the infrastructure market “is likely to bode well for Ericsson,” its Swedish rival due to announce second-quarter results next week (Wednesday, July 21).

— Justin Springham, Senior Editor, Europe, Unstrung

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