Nokia forecasts weak second-quarter profit

The No. 1 handset maker says its second-quarter earnings may drop compared with last year, prompting analysts to speculate that rivals Motorola and Samsung will keep cutting into Nokia's market share.

Top handset maker Nokia warned Friday that second-quarter earnings would fall and sales could drop as its patchy handset portfolio proves no match for tough competition.

Nokia said second-quarter earnings per share would be between 15 cents and 18 cents (0.13 euro and 0.15 euro), well below the underlying figure of 23 cents from a year ago and missing all expectations in a Reuters poll that called for earnings per share of 22 cents.

The outlook seems to confirm analysts' fears that Nokia, which makes more than one in three handsets sold globally, could lose more market share to rivals like the United States' Motorola and South Korea's Samsung Electronics, which earlier on Friday posted record earnings.

Samsung said earlier that it expects its market share in the January-March period to have risen by almost 4 percentage points to 14 percent, with sales to continue rising in the second quarter.

Nokia said that mobile phone volumes grew by a heady 29 percent annually in the first quarter, but the company saw growth of only 19 percent, after being hampered by the holes in its phones lineup.

"It does not look good. It is obvious that they are losing market share on mobile phones, and the guidance indicates that next quarter will be worse than we expected," said analyst Urban Ekelund at Redeye.

"The company will not be able to turn this around overnight. I think the share price will drop further from these levels."

The Finnish company posted January-March earnings per share of 20 cents, above an underlying 19 cents from a year ago and in line with a warning issued April 6 that spooked investors--as Nokia admitted it could not grow its profits quickly, despite a booming market.

Nokia said group sales would be flat or low in the second quarter, versus expectations of a fall of 3 percent in the poll, as rivals exploit Nokia's weak offering of mid-priced phones with color-screen and camera models of their own.

Nokia CEO Jorma Ollila reiterated that the firm aimed for a 40 percent share of the mobile phone market, but analysts said that looks unlikely at present.

"Nokia's main priority must now be to stabilize its market share by Q3 and hope that it can reverse the current decline in Q4," said Ben Wood of Gartner Dataquest. "In the face of aggressive competition from Motorola, Samsung LG and Siemens, this is going to be a challenging goal to achieve."

Story Copyright  © 2004 Reuters Limited.  All rights reserved.

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