Nokia cuts handset sales target

Nokia hopes phones like the 9290 communicator can drum up sales

HELSINKI, Finland (CNN) -- Finland's Nokia, the world's biggest mobile phone maker, said profits rose in the second quarter as it cut costs but trimmed its estimates for global handset sales.

Net income rose 46 percent to 862 million euros, or 0.18 euros a share, in the second quarter compared with 589 million euros, or 0.12 euros a share, a year earlier. Sales fell 6 percent to 6.9 billion euros.

Its closely watched pro-forma earnings per share -- a figure excluding one-time costs -- came in at 0.19 euros, in line with the target of 0.18-0.20 euros it gave last month in its mid-quarter update. Pro-forma pretax profit rose 11 percent to 1.29 billion euros, while analysts were expecting 1.27 billion euros.

Nokia (NOK) forecast second-half sales growth of three to 10 percent. The group affirmed it expected to achieve a pro-forma earnings per share of 0.79-0.84 euros for 2002, roughly in line with a previous forecast of 0.83 euros.

VIDEO Nokia CEO, Jorma Ollia, talks to Liz George about why he's remaining optimistic.  Analysts fear competition. CNN's Tony Campion reports.    MORE STORIES • Finland's Nokia cuts sales again  • Nokia stock could hit 4 euros  • Ericsson: More gloom possible

"Nokia's profitability outlook remain's strong, reflecting the company's operational efficiencies and cost control," the company said in a statement. "Third-quarter pro-forma earnings per share is expected to be in the range of 0.15 euros to 0.17 euros."

It expects third quarter sales in the range of 7.2 billion to 7.6 billion euros, compared with 7 billion euros in the third quarter of 2002.

Nokia launched a record number of new models this year, including a colour-screen camera-phone, as competitors like Samsung, Sony Ericsson and Motorola attack its dominance.

However, Nokia trimmed its forecast for growth in the global mobile handset market to 400 million units this year, from a previous estimate of between 400 million and 420 million units. It repeated that it plans to snatch global market share of 40 percent.

But investment bank Merrill Lynch has already cut its forecast for global handset sales in 2002 by 6 percent to 385 millions units, and reduced its estimate by 11 percent to 410 million units in 2003.

Merrill Lynch has predicted Nokia's share will fall from around 35 percent this year to 34 percent in 2003 and 33 percent in 2004.

Some analysts said that while Nokia's market share has been slipping, it has room to improve profits.

"Nokia is still looking for growth," Per Lindberg, an analyst at Dresdner Klienwort Wasserstein, told CNN. "This shows the industry is a growth industry, even with these tough market conditions."

Others maintain the sector cannot sustain the current levels of growth for long.

Philip Townsend, director of Telecom Research at Arnhold and S. Bleichroeder in London, said his reading of Nokia's numbers shows revenue and margins are actually flat -- and are being supported by initial sales of new handset models and lower manufacturing costs in China.

But as sales continue to decline, he said those cost savings will have less of an impact, "and that suggest the overall market is going down fast."

Nokia and its rivals have been hit by slowing demand for mobile phones as markets become saturated. At the same time, telecom operators have slashed or delayed spending on new networks as they attempt to cut debt amid sluggish growth prospects.

Sales are stagnating as many consumers hold off buying new handsets until the launch of high-speed, or third generation, mobile phone services.

Motorola (MOT), the world's second largest handset maker, this week posted the biggest net loss in company history during the second quarter even though it beat Wall Street expectations.

Nokia's stock moved in and out of positive territory and was down 3.3 percent to 13.90 euros in midday Stockholm trading on Thursday.