Nokia Issues a Surprise Profit Warning

Nokia issued a surprise profit warning on Tuesday, saying weaker market conditions would cut second-quarter earnings and sales, sending its share into freefall.

The world's largest maker of mobile phones said it expected April-June pro forma earnings per share of 0.15-0.17 euros compared to earlier estimates of 0.20 euros, and halved its sales outlook for the quarter to growth of less than 10 percent year-on-year.

Investors punished Nokia -- which has in the past weathered market downturns better than rivals Motorola, Siemens and Ericsson -- sending its shares 20 percent lower to 27.51 euros ($23.31) at 8:50 a.m. ET and sending shockwaves across European and U.S. markets.

``The general economic slowdown in the U.S. has recently shown signs of extending to other regions and to the wireless telecommunications industry as a whole,'' Nokia said in a statement.

Chief Executive Jorma Ollila said in a statement Nokia had cut its forecasts due to a deterioration in the general market driven by economic uncertainty, the transition to the mobile Internet and less aggressive marketing by telecoms operators.

``This was a clear drop for Q2 ... When (Nokia) gave its estimate for the second quarter, it was seen to be moderate, but the market has come down significantly since then,'' said analyst Erkki Vesola at Mandatum Bank.

``The only positive thing in the statement is that (Nokia) says it sees the second half stronger than the first-half, but there is no telling how much of that is real.''

Nokia said it was currently revisiting its outlook for the second half of the year, as the market slowdown was expected to continue having an adverse effect. Updated estimates for the second half of 2001 would be released on July 19 in connection with its second-quarter earnings report.

The Finnish company, known in the past for its accuracy in forecasting, said it now expected the global mobile phone market to show only very modest growth this year compared to 2000 when about 405 million handsets were sold.