Nokia Oyj cut its forecast for sales and profit because consumers are spending less on mobile phones. Shares of the biggest handset maker fell 23 percent, dragging down telecommunications stocks in Europe and the US.
The company expects per-share earnings of 0.15 euro to 0.17 euro in the second quarter, down from an earlier prediction of 0.20 euro. Sales will grow less than 10 percent, compared with a previous forecast of 20 percent, Nokia said.
"Nokia was our last hope in the technology" industry, said Johan Lannebo, who manages about US$4.6 million in Nordic stocks at Lannebo Fonder AB. "Its earnings have seemed more certain than rivals and that's been factored into the share price."
Nokia had been more optimistic than rivals about the prospects for mobile-phone sales. Now earnings are slumping as the economy slows and consumers wait for new phones that allow faster Internet access. The company cut its forecast for industry handset sales and plans to revise its second-half outlook.
Finland's biggest company is the most exposed to an industry slowdown, with 35 percent of the market, more than twice the share of Motorola Inc, its nearest rival. Nokia earned 0.21 euro a share in the second quarter of 2000, when sales rose 55 percent.
Nokia's American depositary receipts, each representing one share, fell US$5.45, or 19 percent, to US$23.26 in New York.
In Europe, shares of Nokia fell 7.87 euros to 26.52, the biggest percentage decline in at least a decade. The drop slashed about 37 billion euros (US$31.4 billion) from the company's market value. The shares are down 44 percent this year.
The company "will take one step at a time," in responding to changing conditions, said Nokia spokesman Lauri Kivinen.
Nokia rivals and suppliers also fell. Ericsson AB shares fell 5.7 percent to 57.5 kronor, while Motorola declined US$0.86, or 5.8 percent, to US$14 in US trading. Shares of RF Micro Devices Inc, which makes semiconductors for cellular phones, fell US$0.61 to US$25.80 after tumbling as much as 21 percent to US$20.80. The company gets about half its sales from Nokia, analysts estimated in January.
"As a rising tide lifts all boats, a falling tide does the opposite," said Rob Radelaar, who manages 10 billion euros in European stocks including Nokia, STMicroelectronics NV and Siemens at Robeco Group in Rotterdam.
Industry handset sales will post "only very modest growth" this year from 2000, when about 405 million mobile phones were sold worldwide, the company said. It had forecast between 450 million and 500 million handsets would be sold this year.
Nokia said demand had weakened more than expected because the economic slowdown in the US is spreading. Phone companies, saddled with debt from their investments in faster wireless services and facing slowing sales too, weren't pushing sales of new handsets as hard as expected, Nokia said.
About 70 percent of Nokia's sales come from mobile phones, and about 25 percent from equipment for wireless networks. That business is also sagging as phone companies, saddled with debt, refrain from spending.
European phone companies spent US$100 billion last year on permits to allow faster Internet access on mobile phones. Now they're trying to cut network costs. British Telecommunications Plc and Deutsche Telekom AG said today they will share mobile-phone equipment in Germany and the UK, letting them lower the cost of building networks by 30 percent.
RSS