Nokia shares fall on fears that sales downturn may yet deepen

Nokia posted higher second-quarter profits, in line with expectations, but shares in the world's top mobile phone maker fell yesterday as analysts feared it could be storing up future disappointments.

The group, which is in the process of launching a record number of new phone models to keep ahead of mounting competition, said it would post second-half sales growth of 3 to 10 per cent, compared with an earlier target of up to 10 per cent growth.

"We are perhaps at the very beginning of the end of the downturn," said Jorma Ollila, the chief executive, adding that economic conditions were expected to be hard in the second half of this year.

Nokia followed US rival Motorola in cutting its forecast for worldwide mobile phone sales to 400 million units this year from a previous estimate of 420 million, confirming that sales have stalled at that level.

"If operators were eagerly promoting phones there would be 500 million phones sold this year," Mr Ollila said.

It forecast earnings per share of €0.79-0.84 for 2002, compared with a previous estimate of €0.83. These forecasts exclude the large Mobilcom-related charge Nokia is likely to take in the third quarter along with other one-off items.

"Everything seems to have come down a bit in terms of their outlook," said Susan Anthony, an analyst at Credit Lyonnais. "You have to assume a really bumper fourth quarter for Nokia to get to their full-year earnings per share target," she added, echoing concerns shared by analysts.

Nokia also disappointed by saying it would take a material charge in the third-quarter against its €752m (£756.5 million) financing exposure to troubled German carrier Mobilcom.

Its shares fell 4.8 per cent.