Nokia cuts forecasts for second time in a week

The Finnish mobile phone maker Nokia dealt the market another blow yesterday by cutting its sales forecasts for the second time in just over a week.

The world's biggest handset maker said it now expected year-on-year sales growth of up to 10 per cent for the second half of the year compared with previous guidance of at least 15 per cent. While the company did not specify what lay behind the revision, analysts suspected its network division, rather than its phones unit, was to blame.

"We believe that the change in guidance mainly relates to the networks division, where the company had guided for 0 to 5 per cent growth for 2002. Based on today's guidance, we believe network sales could be down by around 10 per cent," analysts at Merrill Lynch said.

Nokia also laid out new long-term annual sales and earnings growth targets of "more than" 10 per cent from 2003 yesterday – again a reduction from previous estimates of more like 20 to 30 per cent growth.

It sweetened the pill, however, by saying it remained "comfortable" with its previously-stated earnings guidance of €0.83 a share for the current year. Shares in Nokia rose 1.2 per cent to €13.50.

Only last week, the company slashed its revenue expectations for the second quarter of the year, predicting sales would fall rather than grow.

"While we view the new guidance as slightly conservative, the market should be relieved that Nokia has 'done the deed' and given new full- year (and long-term) guidance, the expectation of which has depressed the stock," analysts at Dresdner Kleinwort Wasserstein said.

At its mid-year strategy update, Nokia said it continued to believe the total global market for mobile phones this year would be between 400 million and 420 million units, up from 380 million units in 2001.

The company plans to have shipped 10 types of colour-screen mobile phones by the end of this year and predicts more than half of its handset shipments next year will have colour screens. It also said it was delivering third generation, or 3G, mobile phone infrastructure equipment to 42 operators.

Nokia said yesterday it planned to provide more comprehensive financial guidance on the second half of the year when it reports its second-quarter figures on 18 July. It predicts second-quarter sales will have fallen 2 to 6 per cent to about €6.9bn to €7.2bn including growth in mobile phones of 0 to 4 per cent and a decline in network sales of 20 to 25 per cent.

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