Second-quarter earnings released last week by major handset manufacturers showed Nokia Corp. losing market share, while Samsung Electronics Co. Ltd. and Sony Ericsson Mobile Communications L.P. increased their sales expectations for the year.
Nokia set a dismal tone for the second-quarter earnings announcements, saying it has cut mobile-phone prices in a strategy designed to keep its position in the industry. “We employed pricing selectively with certain products to stabilize our mobile device market share,” said Jorma Ollila, chairman and chief executive officer of the company.
Nokia further reported modest results with a 14-percent jump in net profits in a period that witnessed a slight dip in its handset market share.
The company sold 45.4 million units during the second quarter, estimating its market share at 31 percent, down from 32 percent last quarter on a net sales decrease of 13 percent. Its mobile sales stood at $5 billion with an operating margin of 19.1 percent.
The vendor said it counted a net profit of $882 million, or 18 cents per share, compared with a net profit of $770 million, or 16 cents per share, for the same period last year. The company’s overall operating cash flow was $1.7 billion, while its cash balance was $14.2 billion.
Its third-quarter forecast stands at between $8.15 billion and $8.3 billion in net sales compared with $8.5 billion for the same period in 2003.
The company said the overall global mobile device market shipped 148 million units in the second quarter and Nokia expects total market volume to surpass 600 million units for the full year.
Shareholders reacted negatively to the results and Nokia stock dropped about $2 per share during the course of last week. It stood at $12.36 per share at press time, dangerously close to its 52-week low of $12.01. Still, analyst Alert Lin of American Technology Research emphasized a “buy” rating on the stock. “We believe the giant will rebound and the shares remain attractive over the next year based on new phones and solid backdrop for cell phone demand globally,” Lin said in a research note.
Samsung, meanwhile, reached $2.71 billion in overall net income for the second quarter. The company said it experienced strong sales in its semiconductor, LCD and telecommunications networks business, but it experienced slight losses in its digital media and appliance businesses.
Its mobile-phone division remained unchanged in revenues from a year ago, again recording $3.96 billion in revenues. Even so, the number of phones sold increased to 22.7 million, up from 20.1 million in the first quarter, pointing out the effect of lowered pricing on handsets.
The company said it is on target to sell 86 million units for the full year 2004, up from previous forecasts of 65 million. The company also expects average selling prices of phones to increase in the third quarter with pricier models coming to market.
Samsung also said it will increase its annual capital expenditure from $6.8 billion to $7.6 billion “in order to expand the gap between it and its competitors.”
Also to that end, the company’s Samsung Telecommunications America subsidiary said it plans to launch six new CDMA and GSM phones this summer in the United States. The new product lineup will include: the d415 phone with a color screen and multimedia features; the a790 CDMA/GSM global phone; the e316 and e317 integrated camera phones; the upgraded i600 smartphone; and the a700 megapixel camera phone with streaming video and camcorder capabilities.
Sony Ericsson said it shipped 10.4 million units in the quarter, a 55-percent increase from the same quarter last year. Sales were up 34 percent from a year ago to $1.86 billion, and net income stood at $110 million, compared with a loss of $126 million last year.
The company pointed to shipments of new products, including its Z1010 UMTS 3G phone, the K700 high-end multimedia GSM phone and the Premini NTT DoCoMo phone, for its strong results.
Sony Ericsson revised its global market outlook for the year up by 50 million phones, echoing Nokia’s prediction that approximately 600 million handsets will ship worldwide this year.
Audiovox, fresh from announcing the first megapixel camera in the United States with Sprint PCS, also reported solid results for the second quarter.
The company said net sales were $438.2 million, up more than 45 percent from second-quarter 2003. Net income totaled $3.7 million, compared with $2.1 million a year ago, and earnings per share were 17 cents, compared with 10 cents last year.
For its part, the Audiovox Communications Corp. subsidiary posted net sales of $290.2 million, up more than 53 percent from a year ago. Sales of wireless handsets increased 43.9 percent to 1.596 million units, for which Audiovox credited its camera phones and color displays with CDMA 1x technology. Average selling prices of Audiovox handsets increased to $170 per unit.
Audiovox said it expects its previously announced transaction with UTStarcom Inc. to close during the fourth quarter. Audiovox plans to sell its wireless assets and certain liabilities for $165.1 million to UTStarcom, thereby allowing it to exit the wireless business and focus on the consumer electronics space.
