The fat cat of vendors, Nokia Corp., ate humble pie last week despite dishing out a juicy fourth-quarter report.
The report, which beat estimates in spite of recent rumblings about a slowdown in handset sales, is a bellwether of the hopes and fears of the wireless industry as a whole.
The hopes lie in Nokia’s robust fourth-quarter and year-end report of sales and profits. The fears ripple in its first-quarter forecast for 2001.
In its fourth-quarter report, the manufacturer recorded net sales of $8.6 billion, a 46-percent jump from sales during the same period last year of $5.9 billion. Its earnings per share rose by 39 percent to 22 cents while its operating profit leaped by 32 percent from $1.2 billion in 1999 to $1.7 billion.
For the full year, net sales rose by 54 percent from $18.5 billion in 1999 to $28.4 billion in 2000. Its operating profit hiked up from $3.6 billion in 1999 to $5.3 billion a year later, representing a 48-percent increase.
On the dark side, the company said first-quarter earnings will be flat. It also lowered its sales growth forecast to 25-to-30 percent. This reflects its earlier report that industrywide sales will drop between 500-550 million as against a solid 550 million.
The forecast mirrors the quicksand of the market and what has been perceived as the slowdown of the economy as Jorma J. Ollila, Nokia’s chief executive, confirmed: “It’s just not possible to predict as in the previous years,” he said.
The Finland-based company’s report came in the wake of lackluster results from Motorola Inc. and L.M. Ericsson. Motorola’s negative earnings resulted in a plant closing and layoffs. Ericsson outsourced its phone-making business in a restructuring move to concentrate on its third-generation technology.
Reactions from analysts, while basically sanguine, reflect Nokia’s caution about the coming quarters.
Credit Suisse First Boston maintained a strong buy rating for Nokia, saying the company is set for “continued share gains in handsets and infrastructure and should surpass $50 over the next six months and $60-65 over 12 months as the GPRS and upgrade cycle returns.”
Tim Long, of CSFB, said handset margins were 21.3 percent, comfortably ahead of guidance due to strong pricing.
“As a result of a tightening U.S. economy and take share strategy at the company, we are forecasting margins to track below 20 percent in handsets for the first-to-third quarters and lowering our infrastructure margins by 1 percent for 2001,” he noted.
UBS Warburg also maintained its buy rating, observing Nokia continues to excel in GSM infrastructure and may grow faster than the overall market.
“We maintain our buy rating as we continue to believe the company is the best positioned to take advantage of potential margin expansion as industry fundamentals are likely to appear more favorable in the second half of 2001,” said William Davis, an analyst with UBS Warburg.
