Updated from 7:55 a.m. EST
fourth-quarter profit report should ease shell-shocked wireless investors. Its outlook for early 2002 will keep anyone from breathing too easily.
In December, Nokia vowed that strong handset sales would help it grow revenue by 20% sequentially in the final quarter of 2001 and reap greater-than-expected profits of 16 cents to 18 cents a share. The mobile-phone market leader lived up to its boasts with $7.79 billion in revenue and pro forma earnings of 22 cents a share in the fourth quarter.
While meeting the sequential goal, the revenue figure was down 5% from a year ago, when the mobile-phone industry entered into a massive inventory glut that took three quarters to clear.
Nokia shares were up $1.14, or 5%, to $23.35 on Instinet following the report.
The company also said its market share for handsets climbed almost 3% sequentially to 37% in the fourth quarter, along with a 9% jump in mobile-phone volume to 140 million units. Nokia also said, however, that first-quarter sales will probably fall 6% to 10% from a year ago to a range of $6.46 billion to $6.75 billion.
The mobile-phone giant expects to follow the seasonally down first quarter with low double-digit growth in the second quarter before moving up to 25% to 35% growth by the fourth quarter. The company cited a strong year-ago quarter, seasonal factors and product transitions for the first-quarter revenue outlook.
The market was worried about
light customer-addition numbers for the holiday season.
says it maintained market share and average selling prices in the December quarter, but at the same time missed its projected 2001 GPRS (general packet radio service) shipments by nearly 20% and came in a little light on revenue.
Is the wireless sector headed for a North American-led slowdown in 2002, after being cut off by Europe in 2001? Nokia calmed the market back in mid-December with a midquarter update, and it repeated the feat Thursday before the market opened. "The U.S. was one of the good spots in mobile-phone areas for the fourth quarter," said Nokia CEO Jorma Ollila. He added that Nokia has not seen a slowdown in capital spending plans from North American carriers on the equipment side of Nokia's business.
Likewise Ollila defended the health of the Chinese market, which is now Nokia's second-strongest behind the U.S. "I do not see the drama that's been headlined in China," he said, adding that Nokia expects the Chinese market's aggressive spending on equipment to sustain 2001 levels this year. Additionally, the company sees the Chinese handset market growing in step with global growth rates.
Nokia's mobile-phone unit typically carried the day, harvesting $5.9 billion in revenue, flat with the fourth quarter a year ago, and a dramatic 21% sequential improvement from the third quarter's $4.88 billion in revenue. Ollila praised the group's market-share gains, 22 product introductions in 2001 and its plan to introduce 20 new phones in the first half of 2002. The industry leader managed 22% operating margins, up from 19% in the third quarter.
Despite his assertions that "channel inventory is definitely healthier than a year ago," Ollila confirmed that in the fourth quarter there was slight build up of mobile phones in industry channels. Nokia was not forced to cut its average selling prices in the quarter, however, with ASPs down only slightly. Ollila believes ASPs will remain stable in 2002.
Wireless equipment continues to be a dismal business, as the segment posted a sequential uptick from the third quarter's $1.5 billion to $1.73 billion to close out the year. Infrastructure revenue was down 17% from a year ago.
Ollila reiterated Nokia's belief that the infrastructure market will be flat in 2002, but he was confident that those markets Nokia targets would grow 10% in that time. The company's fourth quarter displayed some of the benefits of an improved company reach, as Nokia gained a sizable contract from Cingular, despite Nokia's traditional weakness among North American carriers. The No. 2 infrastructure player was able to reverse the third quarter's operating margin slide to 9.3% from 15.8% by posting a 13% margin.
The mobile-phone leader forecast 420 million to 440 million mobile-phone shipments industrywide for the full year 2002, up from an estimated 380 million unit shipments in 2001. Motorola predicted the industry would ship 420 million mobile phones in 2002 during its quarterly outlook Wednesday.