Nokia warns of uncertain future

Nokia, the world’s largest mobile phone producer, today warned of an uncertain future outlook and weak sales for the remainder of 2003.

The Finland-based group said sales would be hit as the mass market for handsets became saturated, and mobile phone networks delayed rolling-out their third generation high-speed services.

The news came as the group posted pre-tax profits of €1.3bn for the first three months of this year – although the 4% decline was less than analysts had feared.

While market reaction was subdued, traders in London said the news had contributed to a generally upbeat mood on an otherwise quiet day for corporate announcements.

Nokia said revenues declined 3% year-on-year with the performance of the Nokia Networks equipment manufacturing unit particularly disappointing.

The handsets business has made a number of innovations in an effort to keep sales of phones moving with its main handset unit continuing to sell well.

Nokia said handset sales should increase between 4% and 12% from last year. The company has already forecast 10% growth in phone sales for the year.

Nokia chairman and chief executive Jorma Ollila said demand for colour-screen and multi-media handsets had taken off.

But the mass market is fast approaching saturation point in Western Europe where phone users have been more reluctant than manufacturers would like to upgrade their handsets regularly.

Nokia has been forced to cut production jobs as the growth in handset sales slowed.

The networks unit has struggled to find new customers and Nokia has predicted revenues for the business will fall by 15% this year as mobile phone networks continue delay rolling-out their third generation high-speed services.

Second quarter earnings are also expected to be hit by the cost of previously-announced redundancies across the group.