Nokia Misses Forecasts, Sees Weaker 2009
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HELSINKI -- Top cell phone maker Nokia reported a worse-than-expected dive in fourth-quarter profit, and warned market volumes would shrink 10 percent this year as the economic slowdown hits consumer spending.
Analysts had forecast an 8-percent fall in the handset market in 2009, and only last month Nokia's (NYSE: NOK) own view was that it would dip 5 percent.
"It is interesting that they lower guidance for 2009 already now after their assessment in December. It shows how fast things have worsened in the past month," said Johan Strandberg at SEB Asset Management.
Shares in Nokia slid more than 8 percent to their lowest level since mid-2004, souring the mood across Europe's bourses, before cutting losses slightly to trade down 6.1 percent to 9.61 euros at 1223 GMT (7:23 a.m. EST). In U.S. markets, shares of Nokia lost $1.41, just over 10 percent to finish out the regular trading day today at $12.30.
Nokia's said its underlying fourth-quarter earnings per share were 0.26 euros, missing the average forecast of 0.30 euros in a Reuters poll, but within the wide range of estimates.
PROFITABILITY UNDER STRAIN
Profitability at Nokia's key handset unit roughly halved to the lowest level this decade, and Nokia warned the unit's profitability would not reach its targeted 13-19 percent range in the first half of the year.
Global number three handset maker LG Electronics earlier posted a record quarterly net loss, and last week number four Sony Ericsson announced a bigger-than-expected loss along with plans for further cost cuts.
Nokia said it aimed to cut annual costs at the handset unit by 700 million euros ($909 million).
"We are taking action to reduce overall costs and to preserve our strong capital structure. This is clearly our top priority in the current economic environment," Chief Executive Olli-Pekka Kallasvuo said in a statement.
Nokia's figures confirmed that cell phone sales contracted last quarter for the first time in more than six years.
"Nokia is now having to cope with a 'double whammy' of market slowdowns in both developed and developing markets," said Neil Mawston from Strategy Analytics.
"In recent weeks, the macroeconomic environment has deteriorated rapidly, with even weaker consumer confidence, unprecedented currency volatility and credit tightness continuing to impact the mobile communications industry," Kallasvuo said.
Nokia slashed its annual dividend proposal to 0.40 euros from 0.53 euros paid last year, and said it had no plans at the moment to buy back shares this year.