Sun, Oct 19, 2003 - Page 11 News List

Nokia's Ollila bets on game phone to counter sales drop

BLOOMBERG

On Aleksanterinkatu, Helsinki's main shopping street, billboards are touting the N-Gage, Nokia Oyj's new mobile gaming device that doubles as a phone, while in Paris, the Finnish company this month crowned a European N-Gage champion.

The billboards and the N-Gage competition are part of Nokia chief executive officer Jorma Ollila's plan to expand into the global US$27 billion gaming market dominated by Nintendo Co and revive sales that have barely risen in the past eight quarters.

"Nokia's biggest challenge is to find revenue growth," said Jarmo Nieminen, who helps manage US$83 billion, including Nokia shares, at Nordea AB, the Nordic region's biggest bank.

Nokia, the world's biggest mobile-phone maker, may report a sales drop of 3.9 percent for the third quarter when it releases earnings Thursday, according to a survey of 11 analysts by Bloomberg News. Net income probably rose to 811 million euros (US$951 million), or US$0.17 a share, from 610 million euros, or US$0.13 a share, as a charge wasn't repeated, the survey showed.

Excluding one-time charges and gains, Nokia's earnings per share probably slid to US$0.17 from US$0.18 in the third quarter, according to the survey. Ollila, 53, said in July profit excluding one-time items will be held back by marketing costs for N-Gage and other products. The N-Gage campaign may cost US$100 million, according to Brand Republic, a research company.

Third-quarter handset revenue probably fell as the euro was on average 15 percent stronger than the dollar than a year earlier and average phone prices slip because Nokia is selling more phones in emerging markets such as India and China, where people buy cheaper models, Nokia said in July in connections with earnings. Network sales have slumped as phone companies reduce spending.

Nokia's stock has risen 7.2 percent in the past six months, compared with a 9.7 percent gain in the Dow Jones European Stoxx 50 index and a 69 percent surge in shares of competitor Motorola Inc. Nokia's shares fell US$0.29, or 0.3 percent, to 14.58 euros yesterday, giving Nokia a market value of 69.9 billion euros.

Motorola, the world's second-largest mobile-phone maker, Monday said net income in the third quarter was unchanged at US$116 million, while sales rose 4.5 percent to US$6.83 billion.

Nokia, based in Espoo, Finland, last week started selling the N-Gage game device in 30,000 shops simultaneously in 60 countries. The company plans to sell "several million" N-Gages next year, according to Kari Tuutti, a Nokia spokesman. The device, which will retail for about 300 euros, also doubles as a mobile phone, and has a radio, a Web browser and a digital music player.

"Mobile gaming is going to become a growth sector," said Richard Windsor, an analyst at Nomura International Plc. "Nokia is moving outside its core business to try and gain growth elsewhere because growth from phones is not going to be huge."

Nokia's sales, which grew as much as 50 percent in the late 1990s, have barely risen in the past two years as phone markets in Europe and the US near saturation, and as new services such as photo messaging failed to take off as fast as Nokia predicted.

That's as phone companies such as France Telecom SA and Deutsche Telekom AG are curbing spending on wireless networks to cut debt.

In the most recent quarter, handset revenue probably fell 1 percent to 5.6 billion euros, according to the analyst survey.

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