Nokia Warning Sinks Telecoms

Nokia Corp., seen as a bastion of strength in the troubled cell phone industry, joined the profit warning club Tuesday, sending not only its stock but others in the telecommunications field tumbling.

The Finland-based company, by far the world’s largest producer of mobile phones, said its second- quarter sales will grow less than 10%, down from an earlier forecast of 20%.

Nokia said the economic slowdown has spread from the United States to the rest of the world. As a result, the mobile phone market will show “only very modest growth this year,” Nokia said, compared with 2000, when about 405 million cell phones were sold by the industry worldwide.

On Tuesday, Nokia’s American depositary receipts, each representing one share, fell 19% in New York Stock Exchange trading to $23.26, down $5.45.

Nokia’s warning helped pull down other stocks.

“As a rising tide lifts all boats, a falling tide does the opposite,” said Rob Radelaar, who manages European stocks at Robeco Group in Rotterdam, Netherlands.

Motorola Inc., the No. 2 mobile phone maker, fell 86 cents Tuesday, closing at $14 on the NYSE. Ericsson, the third-largest cell phone manufacturer, fell 20 cents to close at $5.30 on Nasdaq. And chip maker RF Micro Devices Inc., which gets about half its sales from Nokia, analysts say, fell 61 cents on Nasdaq to $25.80.

Earlier this year, Motorola and Ericsson cut thousands of jobs because of a slide in mobile phone sales. Nokia also has made job cuts, although not as drastic. Last week, Nokia announced plans to eliminate 300 jobs at a plant in Germany; in March it laid off 800 workers at a Texas factory in preparation for transferring some production to South Korea.

There was no comment Tuesday from Nokia on further job cuts.

William Gorman, analyst with PNC Advisors, said a lot of the cell phone industry’s troubles can be traced to product surpluses.

“There were estimates last year that there were 30 million surplus phones throughout the market,” he said. “So, all the companies have had inventory reduction efforts. It [finally] caught up to Nokia.”

Phone companies, saddled with debt from their investments in faster wireless services and also facing slowing sales, were not pushing sales of new handsets as hard as expected, Nokia said.

Part of the product surplus is because a new generation of cell phones--with general packet radio service that can transmit data over the Internet--is set to become available later this year. Some consumers are waiting for these new phones before replacing their models, Gorman said.

Nokia has more than a third of the world’s mobile phone market, more than twice that of Motorola. And about 70% of Nokia’s sales come from mobile phones, with about 25% from equipment sales for wireless networks.

Nokia sells its products in 130 countries and has approximately 60,000 employees.

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Times wire services were used in compiling this report.

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Wireless Woes

Shares of wireless phone giant Nokia plunged Tuesday after the firm slashed its near-term earnings outlook.

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Nokia ADRs on the New York Stock Exchange, monthly closes and latest

Tuesday: $23.26, down $5.45

Source: Bloomberg News