Nokia’s Stock Drops 26% on 3rd-Quarter Earnings Warning
One of the brightest tech-stock stars of the last year, wireless phone giant Nokia Corp., became the sector’s latest casualty on Thursday after warning that near-term earnings won’t meet expectations.
While the Finnish company reported a 64% surge in second-quarter net income as phone sales continued to soar, that news was overshadowed by Nokia’s warning that third-quarter profit will weaken as customers delay cell-phone purchases until new models are available.
The report sent the company’s American depositary receipts on the New York Stock Exchange down $14.75, or 26%, to $41.06, their lowest since early January.
The stock had surged from the $10 range in mid-1998 to a recent peak of $62.50.
Nokia said its second-quarter earnings jumped to about $901 million, up 64% as measured in euros, from a year ago.
Sales rocketed to about $6.5 billion, up 55% in euro terms.
But Nokia, whose colorful, feature-packed handsets have proved more popular than offerings from rivals Motorola Inc. and Ericsson, said it expects slower demand for its existing products as users wait for new models with faster Internet connections.
Nokia said it will unveil fewer new phone models in the third quarter than previously expected. The company declined to comment on the reasons behind the delays.
The expected slowing of sales will push third-quarter earnings below second-quarter results, the company said.
Even so, Nokia said it was confident growth would continue at current levels or more for the second half of the year as a whole.
“Overall growth prospects for Nokia in the later part of the year, as well as for the long term, remain unchanged, stimulated by the strong mobile communications market,” Chief Executive Jorma Ollila said in a statement.
The third-quarter warning comes less than a week after one from rival Ericsson. The Swedish company warned that losses in its phone-making unit would drag third-quarter pretax profit below that of the first or second quarter, overshadowing a trebling in second-quarter operating profit at the company’s network unit, which accounts for two-thirds of its sales.
Some analysts said the reaction of Nokia’s stock was overdone.
“It’s wrong to interpret it as a profit warning because things look good for the fourth quarter,” said Anders Jarheim, who helps manage about $2 billion in stocks at Oehman Fondkommission in Stockholm. “There’s no reason to abandon Nokia shares because of this.”
Analysts surveyed by IBES had expected Nokia to earn 76 cents per U.S. share this year, and 99 cents in 2001.
Nokia grabbed 27% of the cell-phone market last year, according to market researcher Dataquest Inc. Motorola had 17% and Ericsson 11%.
Nokia has estimated that the number of mobile phone users worldwide will surpass 1 billion by 2002 and said the number has already grown to 570 million, according to preliminary estimates.
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Bloomberg News and Associated Press were used in compiling this report.
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Nokia’s Nosedive
Shares of wireless phone giant Nokia (ticker symbol: NOK) plummeted after the company warned of a hiccup in earnings growth in the near term.
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Nokia shares, weekly closes and latest on the NYSE
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Thursday: $41.06, down $14.75
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Source: Bloomberg News
