Nokia Sees Handset Market Cooling Off

The company forecasts 10% growth after a year in which industrywide sales expanded twice as fast.
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Nokia

(NOK) - Get Report

expects the red-hot handset market to cool down next year.

CEO Jorma Ollila said at the company's analyst day in Manhattan Thursday that Nokia expects the global cell-phone market to expand 10% in 2005. That comes after a sizzling 2004 brought industrywide sales to a projected 630 million units.

Continued growth of market is good for all the players, of course. But Nokia's comments suggest that the industry leader expects the market's yearlong acceleration to finally let up in 2005.

The cell-phone market is projected to have grown more than 20% for 2004. The industry sold some 510 million handsets in 2003, and early forecasts for 2004 called for sales in the 560 million-unit range.

Nokia also said it plans to launch 40 new phones next year, two-thirds of which will have cameras. More than half are expected to be clamshells, slides and other non-monoblock models, the company added.

Nokia has spent 2004 fighting a rearguard action against inroads by rivals ranging from

Motorola

(MOT)

and

Sony Ericsson

to

LG

and

Samsung

. The company went into last holiday season without enough camera phones, and consumers defected en masse. Nokia responded by slashing prices, and last quarter the company posted surprisingly strong sales, suggesting to analysts that the Helsinki-based company is well on the road to recovery.

Meanwhile, Ollila says the company is in the middle of an 18-month to two-year restructuring process. His aim is to cut research and development costs to 9%-10% of sales by 2006, and to reduce by half the time it takes to get new products to the market. Ollila says "this is not something that will take five years."

Nokia added that its long-term market share goal remains 40%. The company saw its hold on the handset market rise as high as 39% before last fall's fashion debacle, but the number now rests at around 33%.

Early Thursday, Nokia slipped a nickel to $15.74.