Positive Outlook for Handsets

Global total handset sales look set to be as high as $460 million in 2003 if Nokia Corp.'s (NYSE: NOK) guidance for 2003 is anything to go on, according to analysts at Lehman Brothers. They expect Nokia's management, gathered in Dallas for an investor strategy update, to provide guidelines for market growth that would take total global sales from around $400 million this year to $440-460 million in 2003, a growth target of 10 to 15 percent. This is in line with analyst predictions generally. "We have been predicting low double-digit growth for 2003 for some time now, and we don't expect any major surprises to come out of the Dallas presentations," says Gartner/Dataquest senior mobile analyst Ben Wood. Lehman's market watchers do not expect anything so rosy for the infrastructure business, with Nokia expected to predict a market that ranges from flat to 10 percent down on 2002. The analysts believe the market will shrink by 10 percent in total, but that Nokia's business will decrease by a lesser amount, 7.5 percent. Further positive news generally, though specifically for Nokia, comes from chipmaker Texas Instruments Inc. (NYSE: TXN), which yesterday raised its guidance for the fourth quarter (see TI Ups Q4 Guidance). TI noted strong growth in its wireless business, and, "given Texas Instrument's positioning as one of Nokia's key chip suppliers, we believe these comments may further highlight constructive near-term fourth quarter 2002 trends for Nokia," states the Lehman team in a research note. Indeed, the analysts believe Nokia to be "enjoying good momentum from new handset rollouts, notably in Europe where we believe its share gains have been substantial in the current quarter, mostly at the expense of players such as Sony Ericsson Mobile Communications and Alcatel SA (NYSE: ALA; Paris: CGEP:PA), as well as global number two Motorola Inc. (NYSE: MOT)." Nokia is the clear, undisputed leader in the global mobile phone market with 35.9 percent of third-quarter global sales (see Nokia Extends Handset Lead). It seems the Finnish giant is benefitting particularly from pre-Christmas sales in Europe and carrier promotions in the U.S. "In addition, in China where we expect pressure from local handset vendors to continue over the longer term, Nokia may benefit on a sequential basis from the release of new phones," states the Lehman team. Nokia wasn't the only company on the receiving end of a positive outlook. The Lehman analysts have also raised their earnings per share estimates for Samsung Electronics Co. Ltd. (Korea: SEC) by 4 percent for 2002 and 9 percent for 2003, a revision "due mainly to our higher assumptions for SEC's handset shipments. We have raised our estimate for SEC's handset shipments to 55.4 million units for 2003 from 47.3 million." Samsung (10.6 percent third-quarter share of sales, up 52.4 percent year-on-year) is making great inroads in the global market, and could be pressing Motorola (14.4 percent third-quarter share of sales) hard in 2003 for the number two position. Add all these nuggets to the upbeat Morgan Stanley note from yesterday (see Better Days on the Horizon) and the current movement in the Unstrung 25 index of publicly listed wireless companies, and it's almost a tsunami of good news. We noted not so long ago that there was a general uptick (see Unstrung Index on the Rise), and much to our surprise it has not abated. A look at the index chart for the past 3 months shows that since a low of 57.98 in late September, there's been a general trend upwards (give or take a few valleys here and there) to reach its current position in the mid-80s. Although not enough to spur an increased order of fizzy pop and sweeties for the Yuletide season, this is as encouraging a trend as this industry has given us in 2002. — Ray Le Maistre, European Editor, Unstrung
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