Nokia’s reversal of stock decline may depend on profit surprise

Nokia’s reversal of stock decline may depend on profit surprise
Comment E-mail Print Share
First Published: Thu, Apr 17 2008. 01 06 AM IST

Testing times: Nokia chief executive Olli-Pekka Kallasvuo.
Testing times: Nokia chief executive Olli-Pekka Kallasvuo.
Updated: Thu, Apr 17 2008. 01 06 AM IST
Helsinki: Nokia Oyj’s shareholders say a rebound from the stock’s worst quarter in almost four years depends on chief executive Olli-Pekka Kallasvuo beating earnings estimates for the fourth straight time.
Nokia, the world’s biggest mobile phone maker, fell 24% in Helsinki trading in the first three months of the year, its biggest drop since the second quarter of 2004, on concern sales growth in developed markets will slow.
Testing times: Nokia chief executive Olli-Pekka Kallasvuo.
Espoo, Finland-based Nokia increased its market share to 40% last year by selling handsets for less than $50 (Rs2,000) and pricier models with satellite navigation. Kallasvuo will probably report first quarter net income rose 41% to €1.38 billion (Rs8,735 crore) from euro 979 million a year earlier, according to 14 analysts’ estimates compiled byBloomberg.
“They need to report at least in line, and the focus will be more on what they say about the second quarter,” said Jyrki Uurasmaa, a fund manager at Glitnir Asset Management in Helsinki, which oversees the equivalent of $4.7 billion, including Nokia shares. “There’s been some worrying news from suppliers.”
Nokia’s 24% decline in stock price compares with a 22% fall in the 22-share Dow Jones Europe Stoxx Technology Index. In 2007, the stock had its best year since 1999, gaining 71%.
The report will be published on Thursday. Nokia declined to comment on the earnings before the release.
Chief financial officer Richard Simonson said again last month the handset market will expand 10% this year, sending Nokia’s stock 8.2% higher. Demand in Brazil, Russia, India and China continues to increase, he said. Nokia gets less than 5% of sales from the US.
Sony Ericsson Mobile Communications Ltd, the fourth largest mobile phone maker, had said on 19 March first quarter earnings and revenue will fall because of slower handset sales, higher research costs and a parts shortage. Texas Instruments Inc., the second biggest maker of chips for mobile phones, had said on 10 March that demand for semiconductors used in handsets that can download music and access the Web was lower than anticipated.
Sales growth at Nokia may also have been hurt by the weaker dollar, which lost 15% against the euro in the past year. About half of Nokia’s revenue is in dollars or in currencies closely tracking it, a regulatory filing shows.
The 26% increase in unit shipments last year was helped by models such as the N95 with satellite navigation and the thin 6300 in the high- and mid-priced segments, and by the 1100 and 1200 series in the entry market.
Nokia’s market share tops the combined share of its three closest rivals, Motorola Inc., Samsung Electronics Co. and Sony Ericsson, according to researcher Strategy Analytics. The average price for a Nokia handset was probably €80, down from €89 a year earlier, the survey showed.
“Average selling prices may disappoint a bit, especially in Europe,” Glitnir Asset Management’s Uurasmaa said.
“One issue in the first-quarter report will be how the high-end segment performed,” said Staffan Sevon, chief investment officer at Nordea Asset Management in Helsinki. “Nokia’s offering there is a bit old-fashioned.”
Most of Nokia’s new models will not be available before the third quarter. The company has also promised to introduce handsets with a touch-screen user interface this year to take on Apple Inc.’s iPhone.
“Nokia’s product portfolio is superior compared to rivals, but it lacks a killer device,” said Pasi Vaeisaenen, an analyst at Glitnir Bank in Helsinki, which advises buying the stock.
Ellen Braitman in New York contributed to this story.
Comment E-mail Print Share
First Published: Thu, Apr 17 2008. 01 06 AM IST