The world is still buying a lot of mobile phones, but evidently not enough to give some investors confidence about phone makers’ long-term earnings growth.
Market leader Nokia’s shares tumbled Tuesday after the company said a total of 405 million mobile phones were sold worldwide last year, fewer than some analysts had expected.
Although the industry sales number matched Nokia’s own estimates, it fell short of forecasts as high as 420 million from rivals Motorola and Ericsson.
Nokia alone sold 128 million phones in 2000, but investors are concerned that’s not enough to keep profit growing as phone prices inevitably fall, analysts say. Ericsson is losing money on handsets and, like Motorola, has lost market share to Nokia.
“They gave a disappointing figure for handset sales and the implication from that is a slowdown in the global market,” said Tony Zucker at Thames River Capital in London.
Nokia’s shares (ticker symbol: NOK) on the New York Stock Exchange fell $3.81, or 8.8%, to $39.31. Motorola (MOT) lost $1.06, or 4.9%, to $20.69, also on the NYSE, and Ericsson (ERICY) lost 56 cents, or 5%, to $10.81 on Nasdaq.
Suppliers of semiconductors for mobile phones suffered collateral damage: Texas Instruments (TXN) lost $2.25, or 4.8%, to $44.75 on the NYSE; TriQuint Semiconductor (TQNT) dropped $3.63, or 9.2%, to $35.69 on Nasdaq.
Slower phone sales growth may intensify competition, driving prices down further and hurting profits, analysts said. Nokia has forecast that its operating profit margin on handset sales would exceed 20% by the fourth quarter of this year, after falling to 19.6% in the third quarter last year.
Nokia’s report on 2000 handset sales added to concerns about slowing economic growth in the U.S. Growth in mobile phone sales was already seen slowing this year to about 36% from 45% last year.
Nokia said last month it expects a billion people, or about 16% of the world population, to have mobile phones in the first half of 2002--six months sooner than its previous forecast. It also said its sales will rise by 25% to 35% a year through 2003.
But now, “Clearly the risk has increased, particularly with the current economic situation,” said Merrill Lynch analyst Adnaan Ahmad in a note to investors. Still, he advised clients to take advantage of Nokia’s decline to buy the stock because he expects it to “stay ahead of its peers.”
Dominique Nguyen, a Lehman Bros. analyst, said she maintained her “outperform” rating on Nokia even though she had expected it to sell more than 130 million handsets last year.
Nokia’s stock is priced at about 42 times estimated 2001 earnings per share. By contrast, Motorola’s shares are priced at about 24 times estimated 2001 results.
Motorola, the No. 2 maker of mobile phones, will report fourth-quarter earnings today.
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Investors have hammered stocks of many companies in the wireless telecom business in recent months, reflecting concerns about long-term growth. Many of the stocks fell again Tuesday after Nokia reported lower-than-expected wireless phone sales in 2000. A sampling of wireless-related stocks, including the stocks’ price-to-earnings (P/E) ratios based on estimated 2001 earnings per share:
Ticker 52-week Tues. Pctg. 2001 Stock symbol high close chng. P/E Conexant Systems CNXT $132.50 $16.94 --87% 130 Motorola MOT 61.50 20.69 --66 24 Ericsson ERICY 26.31 10.81 --61 32 Sprint PCS PCS 66.94 26.25 --61 NC Qualcomm QCOM 163.00 73.25 --55 57 Texas Instruments TXN 99.75 44.75 --55 29 TriQuint Semicon. TQNT 67.75 35.69 --47 36 Nokia NOK 62.50 39.31 --37 42 AT&T; Wireless AWE 36.00 22.75 --37 NC Nasdaq composite 5,048.62 2,441.30 --52 NA YLS wireless index 253.90 159.03 --37 NA
NC: can’t be calculated (loss or small profit expected for the year)
NA: not available
Sources: Bloomberg News, IBES International (analysts’ earnings estimates)