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Analysts say Nokia may be too upbeat on its outlook

Nokia Oyj may be too upbeat about the outlook for next year even after the world's largest mobile-phone maker lowered its forecast for global handset sales seven times since the beginning of last year, investors said.

Finland's biggest company has indicated it expects the phone market to grow 10 percent to 15 percent next year from its estimate for 400 million handsets this year. Nokia will probably affirm the forecast, equal to 440 million to 460 million mobile phones, in a meeting with investors in Dallas today, analysts said.

"I'm skeptical about their growth estimate," said Ville Ahoranta, who helps manage 275 million euros (US$273 million) in shares, including Nokia's, at LEL Employment Pension Fund. "It's a blue-sky scenario. We have no evidence of a mass-market adoption of the latest models."

Nokia's shares have fallen a third this year, wiping about 40 billion euros from its market value, on concern new phones with color screens and cameras won't lure people into replacing their old phones as often and as soon as Nokia expects.

Nokia, once Europe's most valuable company, has seen its market value drop to about US$93 billion from more than US$300 billion in 2000. Getting the market right is key for Chief Executive Officer Jorma Ollila in deciding how to allocate resources, investors said. Nokia's 2001 profit fell 44 percent on higher costs.

Last year, mobile-phone sales declined for the first time in the industry's 22-year history. This year, Nokia expects global sales to rise 5 percent. Nokia has cut its 2002 outlook twice by a total of 10 percent after cutting 2001 forecasts five times.

Nokia and rivals may find that growth can only be achieved by reducing phone prices, investors said. Analysts at Credit Suisse First Boston predict a 5 percent drop in average phone prices next year to US$205.

That jeopardizes Nokia's forecast for at least 10 percent growth in revenue next year, investors said.

Nokia and rivals are increasingly relying on replacement sales because seven out of 10 Europeans and more than half the population of the US already own mobile phones. Users currently change their handsets every two and half years, a period of time Nokia and its rivals are trying to shorten.
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