Nokia learns lesson from grim Q2 results: slims down Q3 profit forecast |
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Fri, 22 Jul 2005 12:05
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The mobile phone giant, Nokia, has reported feeble second-quarter results and forecast a rather bleak third-quarter profit on Thursday, leaving investors in a daze and sending shares considerably lower.
The Finnish cell-phone company fast turning into a leading wireless network seller and owning one-thirds of the global mobile market, Nokia has been hit strongly by severe competition in spite of a substantial demand in the second quarter. This was because the growing demand chiefly came from Asia and Eastern parts of Europe that used inexpensive simple mobile models, which did not bring in the desired profits.
This trend sent Nokia dwindling in its second quarter, with the earnings per share being 0.18 euro, which was higher than last year’s 0.15 euro, however, lower than the estimated average figure by the Reuters poll of 30 analysts of 0.19 euro.
Meanwhile, shares of the Finnish firm plummeted 10% to hit 13.22 euros. Nevertheless, they were about 12 percent higher than a relatively sluggish 2004. Fund manager at Aktia Ban, Mr. Miska Kuhulampi commented, “The margin trend is concerning, and the competition is fierce. The sector is not a favorite of ours; they're killing each other.”
Considering the disappointing second quarter results, Nokia seemed to have taken a cue and promptly trimmed down its third-quarter profit forecasts, anticipating the earnings per share or ESP to range between 0.14 and 0.17 euro, against the earlier expectations of achieving 0.20-euro. Similarly, a third-quarter sale of about 7.9 billion to 8.2 billion euros was forecast, against the prediction of experts of 8.16 billion euros.
Despite increased shipment of mobile handsets by 34% to 60.8 million units, Nokia registered a fall in the average selling price (ASP) to 105 euros as compared to 110 in the previous quarter. Sales in the second quarter grew 25% to 8.1 billion euros ($9.78 billion).
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