Nokia Warns of Slowing Market Growth

Finland’s Nokia Tuesday warned that it would downwardly revise its estimates
for the second half of 2001, citing signs that the economic slowdown in the
U.S. is extending to other regions.

Based on the first two months of the current quarter, the firm said it now
anticipates year-on-year sales growth in second quarter 2001 to be somewhat
below 10 percent, down from its earlier estimate of 20 percent. The diluted
pro form earnings per share is estimated to be in the range of EUR 0.15 to
0.17 in the second quarter, down from the previous estimate of EUR 0.20.

“We have been able to successfully follow our set strategy of increasing
market share in phones and heading for the leadership position in third
generation mobile networks,” said Jorma Ollila, chairman and chief executive
officer of Nokia. “However, we have recently seen a weakening in market
conditions to levels below our earlier estimates. We believe this slowdown
is a result of a general market deterioration — driven by economic
uncertainty, the ongoing technology transition and less aggressive marketing
by the operators.”

The company said it now estimates only very modest growth in the global
mobile phone market this year as compared to 2000, when about 405 million
phones were sold. Nokia noted that it expects the market for phones will be
significantly larger in the second half of 2001 than it was in the first
half, but slower growth is still expected to affect capacity-driven network
investments of some operators.

Still, the company tried to keep investors upbeat, telling them that
although it now foresees slower-than-expected growth in its sales, it
believes that its mobile phone business will continue to grow
“significantly” faster than the market during 2001, and that its network
business will achieve an annual growth rate at least on par with overall
market growth.

Nokia also said that it will continue to pursue increased efficiency,
including operational changes intended to “enhance customer focus” in Nokia
Networks and refocusing on production at Nokia Mobile Phones factories in
Texas and Bochum, Germany. It also plans a re-alignment of Nokia Internet
Communications. These actions will lead to a one-time charge of about EUR
190 million.

“While market deterioration has had an inevitable impact on Nokia’s sales
growth, our products have remained strong, our market position has
strengthened and we’ve been able to find further efficiencies through tight
control of our own performance,” Ollila said. “As a result, Nokia has been
able to maintain a high level of profitability.”

He added, “We have intensified our efforts to counter changing market
conditions by accelerating ongoing programs and generating efficiencies and
cost savings. This, in combination with our current financial health and
proven performance, should enable us to exit the current slowdown in a
stronger position than before. We will, together with our operator
customers, continue the implementation of the new technologies with full
speed in order to support the transition into next generation services.”

The company will release a revised outlook for the second half of 2001 on
July 19 in conjunction with its second quarter earnings release.

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