Nokia Shares Dive After Q3 Profit Warning

STOCKHOLM (07/27/2000) - Finnish mobile phone giant Nokia Corp. Thursday reported second fiscal quarter earnings in line with analysts' expectations, but its share price took a dive as the company warned that third quarter per share earnings will come in below the second-quarter figure. The news had an immediate impact on other mobile phone vendors in Europe and the U.S., dragging down share prices in the sector.

Nokia's net profit for the quarter ended June 30 jumped 64 percent to 951 million euro (US$893 million), as compared to 581 million euro in the corresponding quarter last year, the company said in a statement. Net income per diluted share reached .20 euro, largely in line with the consensus earnings estimate of 19 U.S. cents per share from a First Call/Thomson Financial poll of 20 analysts.

Operating profit rose 60 percent to 1.41 billion euro, boosted by an 82 percent increase in operating profit from Nokia's Mobile Phones unit, the company's largest division. Overall operating margin was 20.2 percent, the company said.

Revenue rose to 6.98 billion euro, a 55 percent increase over last year's second quarter, Nokia said. Sales of mobile phones increased by 67 percent to 4.88 billion euro.

Nokia's own outlook, however, sent its stock price into a tailspin. Third quarter earnings per share are expected to be at least equal to a year ago, but lower than the second quarter due to the timing of the new product introductions and seasonality, according to Nokia, the largest mobile phone provider in the world. Prior to Thursday's profit warning, Nokia was expected to report third-quarter earnings per share of 19 cents, according to a consensus estimate of 19 analysts polled by First Call/Thomson Financial.

Fourth-quarter per share earnings, meanwhile, are predicted to be higher than in the second quarter, Nokia said. Although competition is expected to remain fierce, overall growth prospects for Nokia in the later part of the year, as well as for the long term, remain unchanged, Jorma Ollila, Nokia's chairman and chief executive officer, said in the statement.

Unimpressed investors, however, fled the stock in droves. In heavy trading on the Helsinki Stock Exchange, following the release of the report, Nokia shares closed at 48.25 euros, down more than 17 percent from the previous close of 58.75 euro, according to Web-based financial information provider EuropeanInvestor.com.

One of Europe's most highly valued companies, Nokia's plummeting stock sent shock waves throughout the continent and beyond. The stock continued its freefall in heavy morning trading on the New York Stock Exchange (NYSE), where Nokia's American Depository Receipts are traded. At 12:03 p.m. EDT, Nokia was trading at $42.81, down more than 23 percent from the previous close.

Rival mobile phone vendors such as Stockholm-based L.M. Ericsson Telephone Co. and Schaumburg, Illinois-based Motorola Inc. also saw their share prices plunge.

At the end of trading on the Stockholm Stock Exchange, Ericsson closed at 172 kronor (US$18.93), down 5.5 percent on the day, while Motorola in midday trading on the NYSE was down 6.5 percent, selling at $34.25.

In product-related news, Nokia said it is scheduled to begin shipping several new and advanced mobile phone handsets over the next few months. The handsets are likely to be targeted at the emerging mobile Internet market.

The mobile phone industry is gearing up to begin deliveries of a new generation of handsets designed to take advantage of the higher-speed, always-on data transmission capabilities provided by the GPRS (general packet radio service) technology currently being rolled out by GSM (global system for mobile communications) network operators worldwide.

Nokia, in Espoo, Finland, can be reached at +358-10-5051 or via the Web at http://www.nokia.com/.

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