Nokia Oyj Chief Executive Officer Jorma Ollila's 10-year anniversary as head of the world's biggest mobile-phone maker was marked by falling sales and the first decline in annual earnings since 1995.
Now some investors are fretting that the 52-year-old Ollila, who delivered a 200-fold return to shareholders since 1992, may not be able to repeat the kind of performance that made Nokia one of Europe's biggest corporate success stories of the 1990s.
Ollila has "got his job cut out with the slowdown in the handset market," said Mark Denham, who manages about US$2.8 billion of assets in Europe, including Nokia shares, at Clerical Medical Investment Group Ltd. "It's going to get tougher."
Nokia, worth US$300 billion at its peak in March 2000, now has a market value of US$102 billion. Today the company will probably report that net income last year fell to 3.6 billion euros (US$3.2 billion) from 3.9 billion, analysts estimate.
Ollila transformed the former maker of rubber boots and toilet paper into the dominant mobile-phone company, with a third of the market. Hiring by the Espoo-based company and its suppliers helped cut Finland's jobless rate to less than 9 percent from more than 19 percent in 1994.
Like rivals such as Ericsson AB, Motorola Inc and Siemens AG, Nokia is betting an economic recovery in the second half of the year, coupled with the introduction of new products, will help revive demand.
Sales have sputtered as economic growth stalled, phone companies cut subsidies on handsets and consumers saw little reason to upgrade phones. Nokia estimated in December that handset sales industry wide probably dropped 6 percent to 380 million in 2001, the first decline ever. Sales at Nokia's cellphone unit probably fell 3 percent to 6.62 billion euros, according to a Bloomberg News survey.
To be sure, Nokia is outpacing competitors such as Ericsson and Motorola. Even as demand slumped, the operating margin in the handset unit probably remained at 19.3 percent, analysts said.
Nokia has kept margins at industry-record levels by farming out 20 percent of its handset production and by introducing new phones based on older products' platforms.
At a technology conference in Gothenburg this week, mobile- phone chief Matti Alahuhta reiterated a November target of doubling Nokia phone users from today's 300 million in the years ahead. Nokia plans to introduce 20 new phones through June.
"If you already have a Nokia, you'll switch smoothly to a new Nokia," said Mika Heikkilae, a money manager at Pohjola Fund Management Co in Helsinki, who oversees 270 million euros in securities, including Nokia shares. ``It's such a strong brand.'' Still, if the company's strategy misses, there's less room to make adjustments after Nokia already eliminated 7 percent of the workforce in the past year.
"Pressure on demand isn't alleviating and the cost-cutting factor has already been used," said Heikkilae.
Ollila has predicted sales growth will recover to 15 percent this year as consumers snap up phones that allow faster access to the Internet. He's also betting the introduction of new phones will give Nokia a further edge over rivals such as Motorola, the No. 2 handset maker.
Last month, the company said it may exceed its fourth-quarter profit target of between 18 cents and 20 cents per share. On Monday, Nokia said it will sell luxury phones developed by its chief designer Frank Nuovo that cost up to US$21,200 each.
RSS