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Nokia flags slowdown in mobile market

18 апреля 2008

The global mobile handset market will shrink in value in euro terms this year for the first time, industry leader Nokia warned Thursday. This unexpectedly bleak assessment sent its shares nearly 13 per cent lower.

The world’s largest mobile phone company reported a 25 per cent rise in net profit to €1.22bn ($1.94bn) for 2008’s first quarter but said the value of the overall global mobile device market would drop in euro terms in 2008 compared with last year because of the weak dollar and slower global economic growth.

Rick Simonson, chief financial officer, told a conference call that 50 per cent of Nokia’s sales were in dollars or dollar-linked. “There is growth in this market in volume and value if you knock out this crazy currency,” he said.

Olli Pekka Kallasvuo, chief executive, insisted Thursday a combination of slower growth and rising labour and raw material costs would have little impact on demand for mobile phones, which he described as “necessity items”. Nokia still expects the number of phones sold industry-wide to grow 10 per cent in 2008 but these sales are expected to generate less revenue for vendors as average sale prices per phone fall.

Despite Nokia’s confidence and strong profitability, analysts have been fretting over Texas Instruments’ comments on 3G order cancellations and Sony Ericsson’s recent warning on handset sales, among other factors. In addition, analysts have expressed concerns over Nokia’s product cycle, particularly its high-end handsets, which face intense competition from Samsung, Sony Ericsson and Apple’s iPhone, according to Citigroup. Carolina Milanesi, analyst at Gartner, said: “Falling revenues will put more strain on handset vendors. They will have to focus on making low-end devices at a profit and this is not easy. Only Nokia seem to be able to do it at the moment. Samsung have been talking about low-end products but it takes time to learn to cater to this market.”

Companies such as Motorola have struggled in the emerging markets because they have not been able to get their production costs down low enough to make low-cost phones profitably.

For the quarter, Nokia reported that net sales rose 28 per cent to €12.7bn, compared with the same quarter last year.
The operating margin rose year on year from 13.6 per cent to 14.7 per cent but dropped from 15.9 per cent in the fourth quarter of last year.

Источник: Financial Times

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