Nokia, the world's largest mobile-phone maker, warned investors on Tuesday that its first-quarter sales had fallen about 2 percent from a year ago rather than climbing as much as 7 percent as it had previously projected.
Nokia, based in Finland, said that its handset sales were hit unexpectedly hard by increased competition. The decline in revenue, to about US$8 billion for the quarter, would have been worse had sales of networking gear not been stronger than expected, according to the company, which will officially report quarterly results on April 16.
"We have not been able to grow with the market in the United States and Europe, where our share has been very strong," said Jorma Ollila, Nokia's chairman and chief executive, during a conference call with analysts on Tuesday.
Nokia has claimed more success in China recently, but growth in that market is slowing and Chinese manufacturers have increased their capacity, leading to brutal price competition.
Nokia's biggest problem is that it had been slow to recognize the popularity of clamshell phone designs, which have been extremely popular models for companies like Samsung and LG of Korea.
Some analysts said Nokia was also hurt by a resurgence at Motorola, the No. 2 cellphone producer. Motorola, based in Schaumburg, Illinois, was late to the market with camera phones but is now rapidly expanding distribution.
Mobile-phone manufacturers have been jockeying for position in the fiercely competitive global cellphone market. The swift introduction of a more conveniently shaped phone, or one with an attractive new function like a camera, can give a manufacturer an instant boost in market share.
The industry sold 25 percent more phones in the first quarter compared with a year ago. Nokia, however, estimated that its units sold increased just 19 percent for the quarter. That increase was not enough to overcome the decline in the average selling price of its phones, resulting in a revenue decline.
Net sales for the first quarter will be 6.6 billion euros (US$7.9 billion), Nokia said. Earnings per share are expected to be 0.17 euros, the company said, below analysts' average estimates of about 0.21 euros a share. Nokia said the results were tempered by better-than-expected growth in its networks division, where sales climbed 16 percent to 1.4 billion euros.
Ollila said during the conference call the Nokia will introduce a total of 40 phones this year, but analysts said that the mere introduction of new products doesn't ensure that Nokia's market share will start to grow again.
Nokia announces its official first quarter results on April 16.
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