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Nokia Delivers Cautious Wireless Outlook

Investors hammered Nokia shares after making cautious comments about the global mobile phone market.

Nokia executives speaking Tuesday at a bi-annual strategy meeting for investors in Irving, Texas, also raised concerns about the future of the wireless infrastructure business in 2003.

But it wasn't all gloom from the Finnish wireless company. Nokia is predicting that the mobile handset market will grow by at least 10 percent in 2003.

Nokia said it believes the total market volume for wireless handsets will reach 400 million units in 2002, with future growth being fueled by what it calls in a press release "a combination of subscriber growth and a stabilizing replacement cycle." Nokia goes onto say that the mobile subscriber market will grow from "more than 1.1 billion at the end of 2002 to approximately 1.5 billion in 2005."

But while Nokia issued some of its own rosy market projects, investors perceived some of the details in the company's forecast as cautious. In particular, Nokia said it expects the "total wireless infrastructure to be down approximately 20 percent, while the company's addressable market will decline closer to 15 percent. The outlook for the market continues to be challenging as operators focus on cash flow while cutting back on investments."

However, Nokia is optimistic about the rollout of a variety of emerging wireless technologies and applications will fuel future growth, including color screens, imaging applications, multimedia message services and new Java-based wireless applications.

Nokia's latest view of the wireless world, comes just a day after Merrill Lynch released bullish projections for the sector over the next two years. Merrill said Monday it upgrading the stock from neutral to buy, and expects Nokia to sell 474 million handsets next year, which is significantly less than the 440 million the company said Tuesday it expects to deliver to the market.

According to numbers released by Gartner Dataquest last week, Nokia currently has a 36 percent share of the wireless handset market.

Investor expectations were high for Nokia's Texas meeting, shares have surged 90 percent since July, and have risen more than 25 percent in the past three weeks in the run-up to Tuesday's announcement. Nokia did not comment on its fourth quarter or 2003 earnings expectations, more details are expected when it gives a mid-quarter update on December 10.