Nokia sees cellphone, gear market falling in 2009

posted on 14 Nov 2008 23:34 by technologynews


  • Posted on Fri Nov 14, 2008 11:28AM EST

The Columbus Dispatch Thursday 13th November, 06:11:32 AM

HELSINKI (Reuters) - Top handset maker Nokia Oyj said on Friday the world's mobile phone market would fall in the fourth quarter and next year as economic slowdown crimps consumer demand around the world.

It forecast 1.24 billion phones being sold worldwide this year, down from its previous estimate of 1.26 billion, and said handset market volumes and the overall telecom equipment market was expected to fall next year. "The warning dovetails well with Qualcomm and Intel - rapid recent deterioration of consumer electronics demand," said analyst Tero Kuittinen at Global Crown Capital.

The worst financial crisis in 80 years has weakened the economies around the world and official data on Friday showed the 15-nation euro zone economy had shrunk by 0.2 percent for the second quarter in a row.

"In the last few weeks, the global economic slowdown, combined with unprecedented currency volatility, has resulted in a sharp pull back in global consumer spending," Nokia said in a statement.

Shares in Nokia fell more than 7 percent to 9.56 euros, its lowest level since August 2004, but later recovered and were 3.1 percent lower at 10 euros by 1510 GMT. Shares in Ericsson fell 2 percent, after trading up more than 4 percent before the news.

"Developed markets will fare worse and developing markets will fare better," Rick Simonson, Nokia's Chief Financial Officer, told an investor call.

Kulbinder Garcha, analyst with CSFB, said companies heavily exposed to the North American and Western European markets -- like Motorola and Sony Ericsson -- faced tough times ahead.

"The one segment of the market that will grow in 2009 is smartphones, so in the industry Apple, HTC and RIM will outpace the others," Garcha said.


Nokia said it now expects fourth-quarter industry mobile device volumes to be approximately 330 million, well below the 346 million average market forecast in a Reuters poll earlier this month.

The phone maker said it expected its market share in the fourth quarter to be at the same level or slightly up from the third quarter, but that sales and profitability in key devices and services would be hurt.

Nokia estimated in October its third-quarter market share at 38 percent.

Nokia said reaching 20 percent operating profit margin in the unit was not on the horizon, and it would take decisive action to significantly reduce its cost base.

"You absolutely have to be brutal about prioritizing what you are going to continue to invest in the right pace and that means you have to cut some things off the bottom that would be nice to do but they aren't necessary to do. We are absolutely going through that process," said CFO Simonson.

Nokia's forecasts also sent wireless stocks lower in the United States, with Motorola down 5.9 percent, RIM losing 6.5 percent, Apple down 5.9 percent and Qualcomm off 5 percent. (Additional reporting by Brett Young, editing by Rupert Winchester)