HELSINKI – Nokia, the world's largest mobile phone maker, on Thursday posted second-quarter profits at the high end of estimates but said the third quarter would be worse and the last quarter difficult to call due to the lack of visibility in the market.
``Current economic and industry uncertainty limit our visibility for the remainder of 2001... The lack of visibility does not allow us to give specific growth guidance for the fourth quarter,'' Nokia said in a statement. Nokia, currently the only profitable company among the top handset makers, said second-quarter pro forma pre-tax profit fell 20 percent year-on-year to 1.17 billion euros ($1.02 billion), compared with 1.09 billion in a Reuters poll.
The Finnish company has been hit by a freeze in spending on networks by telecoms operators, saturated mobile phone markets in Europe and increased price pressure on handsets.
Nokia cast a cloud over hopes for a possible rebound in the handset market for the rest of the year, despite earlier positive comments from U.S. rival Motorola. Nokia said it expected the market to pick up in 2002, however.
The company's failure to provide a detailed forecast for the fourth quarter is particularly worrisome. Nokia typically has the highest sales of the year during the Christmas period. This year, furthermore, it expects soon-to-be-launched high-speed Internet phones to account for a big share of sales by then.
Even so, its shares rose 8.2 percent at 21.85 euros at 1125 GMT from 20-month lows on relief the news was not worse, outperforming the Dow Jones European Technology Index.
``(Nokia) did better than the worst expectations and their forecast for next year is aggressive. That's the key,'' said Jeff Currington, who manages over six billion pounds of European funds for Morley Fund Management.
``Some of the more extravagantly bearish analyst estimates appear not to have been justified and the share has bounced.''
Nokia said third-quarter pro forma earnings per share would be 0.14-0.16 euros, compared with 0.17 euros in the second quarter. It could only say that the fourth quarter would be better than that.
Net revenues for the second quarter -- over 70 percent of which comes from handset sales -- rose five percent to 7.35 billion euros, less than analysts' expectations.
Nokia said it expected revenue growth in the third quarter to range from flat to five percent.
SILENT ON 2001 OUTLOOK, CAUTIOUS ON 2002
Nokia did not reiterate comments made in connection with its first-quarter report in April that group sales would grow 20 percent this year, nor did it reiterate goals of operating margins in the high teens for networks and handsets for 2001.
But the company cut its forecast for 2002 revenue growth to 25-35 percent some time during the year, less than its earlier forecast of growth at that level for the full year.
Nokia said it expected economic conditions -- driven by the U.S. economic slowdown -- as well as the mobile phone market to improve next year, giving no figures.
``2002 could still be a much better year than people think, but no one is going to take that view until they get confirmation from someone like Nokia, and clearly the company was unable to give that today,'' said Nigel Cobby, managing director at Deutsche Bank's Equity Focus.
Nokia has issued four warnings on sales this year. In April it slashed its 2001 profit outlook, citing the weaker market that has hit rivals such as Ericsson, Nortel and Motorola even harder.
Ericsson shares rose 1.8 percent to 49.70 Swedish crowns in Stockholm. The Swedish company is due to release its second-quarter results on Friday and is expected to post a 5.03 billion crown loss, according to a Reuters poll.
MOTOROLA GAINING GROUND ON NOKIA IN HANDSETS?
Nokia said it was sticking to a goal of reaching a 40 percent global handset market share from current levels of around 35 percent, but now said this was for the long term and not in the next few quarters.
``Given the discounting by some of our competitors and the difficult market conditions, we are placing more emphasis on sustaining healthy profitability,'' Nokia Chief Executive Jorma Ollila said in a statement.
Ollila's comments may indicate that even Nokia, which has in the past been able to gain market share and keep profitability at the same time, was feeling the heat from rivals.
Earlier this month Motorola, the world's second-largest mobile phone maker, said it had gained market share, partly due to a thorough restructuring of the loss-making division and the launch of Internet-enabled mobile phones.
``Read between the lines, and Nokia seems to be admitting it did not manage to extend its market share in Q2, unlike Motorola,'' Nordea Securities analyst Mika Paloranta said.