Nokia CEO: Cell sales to ring rosy in 2001
Jorma Ollila, chief executive of the world's leading handset maker, gives a surprisingly upbeat assessment of the cell phone market.
He also expects a billion people worldwide will use cell phones by the first half of next year, another of the company's predictions the CEO of the world's leading handset maker is standing by.
"We are sticking our head out a lot on this," Ollila told a group of financial analysts.
Indeed. While Ollila wasn't backing down from earlier predictions No. 3 handset maker Ericsson was laying off 12,000 employees. The company once expected global cell phone sales in 2001 would be between 450 million to 525 million. But on Friday, it said sales would instead range from 430 million to 480 million.
The Ericsson announcement was more fitting of the times. Overall, the cell phone market has been hammered because of softening sales of phones. Carriers, especially in Europe, are banking heavily on new phone sales to earn back the billions of dollars spent building higher-speed telephone networks. The once roaring U.S. economy has slowed just when most handset makers have trained their sites on the U.S. market, which remains relatively untapped compared with Europe and Asia.
Yet, Wall Street analysts were happy with Ollila's assessment of the market. On Friday, Banc of America Securities upgraded its recommendation of what to do with Nokia stock from a "buy" to a "strong buy." Consumers will also upgrade to the more powerful phones, capable of receiving e-mails, short messages and other forms of data, "much sooner than the Street suspects," the company wrote in an earnings analysis.
But not all was as cheerful.
Ollila disclosed that last year Nokia lent $1.08 billion to help customers buy its equipment. This year, the company committed $2.7 billion to help its customers pay their Nokia bills. He said that trend should continue.
This practice of selling a customer a piece of equipment, then lending that customer the money to pay for it could be a risky move as many companies now struggle for survival. Analysts have said Lucent, along with rivals Nortel Networks and Cisco Systems, will be hurt this earnings season by the billions they collectively lent to telecommunications service providers that may not be able to pay their bills. Lucent Technologies is slated to report earnings April 24.
Peter Friedland, an analyst with WR Hambrecht, said when times are tough, this practice can raise questions. But in good economic times, the same practice can be a boon.
"It's been more dangerous of late," Friedland said.
Ollila defended the actions during a conference call Friday.
"When compared to Nokia's overall business volumes, (these expenditures) are still relatively small," he said.