Nokia's Reduced Outlook
Nokia Corp., the world's largest mobile-phone maker, reduced its market-share outlook, causing investors already skittish about a lackluster global economy to send the company's shares sharply lower.
The Finland-based cellphone maker blamed the gloomy news on a weaker economy world-wide and a decision to stay out of a handset price war. It said it now expects its third-quarter market share to be lower than initially signaled in July, when it predicted market share of 40%, unchanged from the previous quarter. It still targets an increase in its 2008 market share.
Friday's warning is the latest sign of the combined impact of spreading economic gloom and fierce price competition between mobile companies.
Nokia rival Sony Ericsson, a joint venture between Japan's Sony Corp. and Sweden's Telefon AB L.M. Ericsson, barely broke even in the second quarter as average selling prices fell sharply. It has issued two profit warnings this year.
Meanwhile, Europe's largest mobile operator, Vodafone Group PLC, spooked the market in July with poor quarterly results and a wavering full-year outlook that sent its shares sharply lower. At the time, Vodafone cited difficult conditions in important markets including Spain and Turkey, as well as rising costs.
Shares in Nokia were down 13% at €14.03 ($20.10), a near three-year low.
Shares in companies that make chips for mobile devices also fell sharply. U.K.-based CSR PLC fell 18% before closing down 7%, while Switzerland-based STMicroelectronics NV fell almost 6%.
Nokia said the overall mobile-phone sector is being hit by weaker consumer confidence in several markets. It also attributed its lower forecast to its decision to refrain from cutting prices as some rivals have been doing, as well as the temporary impact of a slower ramp-up of its midrange devices.
Still, Nokia said it expects total unit sales of mobile devices to grow by 10% or more this year, boosted by sales in emerging markets.
Research firm Gartner Inc. said late last month that it expects 11% unit growth in handset sales in 2008, but revenue growth of just 9% as competition and the economic slowdown weigh down average selling prices.
To be sure, Nokia's revision was surprising, said Glitnir analyst Michael Schroeder. "However, Nokia keeping its full-year expectation of increasing market share is helping to offset the negative news," he said.
"To some extent this is almost reassuring," said Gartner's research director for mobile devices, Carolina Milanesi, adding the move shows it took longer for Nokia to feel the impact of the weakening economy than its rivals.
Ms. Milanesi said both South Korea's Samsung Electronics and Sony Ericsson made price cuts in Asia during the past month, and Samsung is also aggressively going after the European market.
Samsung's cellphone division had an operating-profit margin of 13% in the second quarter, up from 7.8% a year earlier, but below the first quarter's 16% margin. Samsung executives said the company boosted marketing expenses sharply in the period.
source
The Finland-based cellphone maker blamed the gloomy news on a weaker economy world-wide and a decision to stay out of a handset price war. It said it now expects its third-quarter market share to be lower than initially signaled in July, when it predicted market share of 40%, unchanged from the previous quarter. It still targets an increase in its 2008 market share.
Friday's warning is the latest sign of the combined impact of spreading economic gloom and fierce price competition between mobile companies.
Nokia rival Sony Ericsson, a joint venture between Japan's Sony Corp. and Sweden's Telefon AB L.M. Ericsson, barely broke even in the second quarter as average selling prices fell sharply. It has issued two profit warnings this year.
Meanwhile, Europe's largest mobile operator, Vodafone Group PLC, spooked the market in July with poor quarterly results and a wavering full-year outlook that sent its shares sharply lower. At the time, Vodafone cited difficult conditions in important markets including Spain and Turkey, as well as rising costs.
Shares in Nokia were down 13% at €14.03 ($20.10), a near three-year low.
Shares in companies that make chips for mobile devices also fell sharply. U.K.-based CSR PLC fell 18% before closing down 7%, while Switzerland-based STMicroelectronics NV fell almost 6%.
Nokia said the overall mobile-phone sector is being hit by weaker consumer confidence in several markets. It also attributed its lower forecast to its decision to refrain from cutting prices as some rivals have been doing, as well as the temporary impact of a slower ramp-up of its midrange devices.
Still, Nokia said it expects total unit sales of mobile devices to grow by 10% or more this year, boosted by sales in emerging markets.
Research firm Gartner Inc. said late last month that it expects 11% unit growth in handset sales in 2008, but revenue growth of just 9% as competition and the economic slowdown weigh down average selling prices.
To be sure, Nokia's revision was surprising, said Glitnir analyst Michael Schroeder. "However, Nokia keeping its full-year expectation of increasing market share is helping to offset the negative news," he said.
"To some extent this is almost reassuring," said Gartner's research director for mobile devices, Carolina Milanesi, adding the move shows it took longer for Nokia to feel the impact of the weakening economy than its rivals.
Ms. Milanesi said both South Korea's Samsung Electronics and Sony Ericsson made price cuts in Asia during the past month, and Samsung is also aggressively going after the European market.
Samsung's cellphone division had an operating-profit margin of 13% in the second quarter, up from 7.8% a year earlier, but below the first quarter's 16% margin. Samsung executives said the company boosted marketing expenses sharply in the period.
source
Posts
No comments: