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Mixed signals
Nokia results offer tech stocks respite
Nokia sent out mixed signals yesterday as the world's largest maker of mobile phone handsets published its report, above, revealing that it had beat expectations for the second quarter but admitted that things would get worse in the next. It also has little idea how the crucial Christmas period will shape up.
The Finnish firm confirmed its place as the sector's only top manufacturer in profit, which helped lift tech stocks in Europe and the US. The shares closed up more than 12%.
But Nokia's chairman and chief executive, Jorma Ollila, warned that the next three months will be tougher with sales up just 5% at the most and margins dropping. He said he was unwilling to make any projections about the Christmas period because of a "lack of visibility", but did offer the market a ray of hope about next year.
"We expect the conditions to start improving towards the end of the year and into 2002 when the industry will show healthy growth," he said.
Analysts expect the third quarter of the year, which includes the slow summer months, to be the bottom of the market for Nokia.
But they warned that the company will face intense competition in the run-up to Christmas.
"The market should improve in the fourth quarter but Nokia is facing competitive challenges which will erode some of the potential upturn," said Per Lindberg, analyst at Dresdner Klein wort Wasserstein. "The fourth quarter is normally the strongest for handset manufacturers."
Nokia reckons that in the second quarter it held on to its 35% share of the handset market but that was at the expense of group margins. Total sales in the second quarter were up 5% at €7.3bn (£4.5bn) but profits dropped 20% to €1.17bn.
Handset sales have been slowing across the industry as mobile operators such as Vodafone have called a halt to subsidising phones to attract new customers.
Analysts do not expect the subsidies to come back into the market until the end of the year, when wireless companies will be seeking to attract users to the next wave of fast internet-access phones.
Photograph: Pasi Autio/EPA