Mobile phone sales during the second quarter gave Nokia Corp. a boost when it released its second-quarter earnings July 24, while its Swedish rival L.M. Ericsson suffered a plunge in its stock prices and several ratings downgrades on news its mobile phone sales were relatively flat.
Nokia reported net sales for its mobile phones division increased by 50 percent during the quarter. Sales increased in all geographic areas, with the strongest growth in the United States and China, said the company.
Despite an increase in overall net sales, Ericsson’s Mobile Phones and Terminals division reported only 1-percent growth in sales over second-quarter 1997. The company pointed to Asia’s financial crisis as a primary reason for weakening sales.
Nokia’s ADRs on the New York Stock Exchange hit a 52-week high of $92.75 following the news and were trading in the $88 range at press time. Ericsson’s ADRs fell from a 52-week high of $34 to around $28 following the news.
Motorola Inc., another top-three handset manufacturer, earlier this month also reported weakening sales, with sales and orders in its Cellular Subscriber Sector declining during the second quarter. Motorola said sales were significantly lower in Asia, and increases in sales of digital products were completely offset by a decline in sales of analog products brought on by a market shift to digital products.
Nokia credits its success in the handset arena partly to a favorable reception in the worldwide market for its products, particularly the 6100 series, which the company said is selling in high volumes globally.
The company’s 6160 model, which is being offered in conjunction with AT&T Wireless Services Inc.’s Digital One Rate plan, has been extremely popular in the United States.
“One of the nice side benefits of having a successful launch is that people really are asking for this product by name,” said Matt Wisk, Nokia’s vice president of customer marketing, USA.
“We have seen one of the quickest product ramp-ups ever for Nokia,” said Wisk, who noted demand at the retail level for that model has been strong and word of mouth has made an impact.
Nokia’s 6150, a Global System for Mobile communications 900 dual-band phone is scheduled to hit the market during the third quarter.
The company’s latest product line-the 5100 series-is a family of digital handsets designed specifically for the consumer market. The series includes a GSM 1900 model, a dual-mode 800 MHz/Time Division Multiple Access/Advanced Mobile Phone Service model and a tri-mode 800 MHz TDMA and 800 MHz AMPS model. The phones feature interchangeable colored face plates, said the company.
Nokia also last week announced it will make manufacturing and distribution investments in Europe to increase its global mobile phone production capacity. The company said it will invest about $186 million in a new manufacturing and distribution center in Hungary and in a production capacity expansion at Nokia Mobile Phones’ plant in Salo, Finland.
The final decision about the location of the new facility in Hungary has not yet been made. However, construction work is planned to begin before the end of this year, and the factory is expected to be fully operational by the end of 1999, said the company.
On the infrastructure side, Nokia signed an agreement with Singapore’s MobileOne for the fifth expansion of its GSM network. The expansion is valued at $30 million.