Second-quarter sales
Nokia's second-quarter sales of EUR 7.0 billion rose by 1% compared with the second quarter 2002.
Mobile phone sales rose by 2% year on year, broadly in line with previous guidance, reaching EUR 5.5 billion. While mobile phone volumes grew by 14%, sales were adversely affected by a weak US dollar and, to a lesser extent, an increased proportion of lower-priced entry-level phone sales in emerging markets such as India. Strong net sales growth in Europe was virtually offset by somewhat lower sales in Asia Pacific and substantially lower sales in the Americas.
Sales in Nokia Networks were flat at EUR 1.5 billion, at the upper end of previously stated guidance. This reflected continued growth in the Americas, flat sales in Europe and lower sales in Asia Pacific.
Second-quarter profitability
Second-quarter pro forma operating profit for the Nokia group declined 32% to EUR 858 million. This included a charge of EUR 399 million related to restructuring in Nokia Networks.
At Nokia Mobile Phones, continued broad product competitiveness and operational efficiency drove profitability, with pro forma operating profit in the second quarter rising 9% year on year to EUR 1.3 billion and pro forma mobile phone margins continued at high levels of 23.1%. At Nokia Networks, pro forma operating loss was EUR 334 million. If the restructuring charge of EUR 399 million were excluded, Nokia Networks would have shown a small pro forma operating profit.
Pro forma EPS (diluted) for the Nokia group reached EUR 0.14, within the previously guided range of EUR 0.13 and EUR 0.16.
Nokia's cash position remained healthy, with total available cash at EUR 9.9 billion by the end of the quarter.
Nokia Networks restructuring measures on track
In the second quarter, Nokia took a charge of EUR 399 million relating to previously announced restructuring at Nokia Networks. This consisted of a non-cash charge of EUR 304 million for impairments and project closures in research and development, with the remainder relating to personnel reductions. By the end of 2003, it is estimated that Nokia Networks will comprise approximately 15,000 employees, compared with a total 17,361 at December 31, 2002.
Outlook for third quarter 2003
Nokia expects its third-quarter mobile phone volumes to grow by well over 10%, representing faster-than-market growth, with strong profitability continuing. However, sales of Nokia Mobile Phones in the third quarter are expected to be flat or slightly down year on year, largely due to a major depreciation of the US dollar, compared with the same period in 2002.
In Nokia Networks, operating conditions show no sign of improvement, and the company is estimating a year-on-year sales decline of 15% to 20% for the third quarter. Given this sales outlook, Nokia Networks is expected to show a small pro forma operating loss in the third quarter.
Nokia expects third-quarter pro forma EPS (diluted) to be in the range of EUR 0.15 and EUR 0.17, while reported EPS (diluted) is expected to be in the range of EUR 0.14 and EUR 0.16. Third-quarter 2002 pro forma EPS (diluted) was EUR 0.18 and reported EPS (diluted) was EUR 0.13.
Nokia mobile phone market share grows to 39%
Nokia's market share for the second quarter is estimated to have grown to 39%, indicating both a sequential and a year-on-year increase. This was mainly driven by market share gains in the US.
Total mobile phone market volumes for the second quarter were up year on year for the fifth consecutive quarter, rising by 11% to 105 million, while Nokia's own volumes grew by 14% to 41 million units.
Nokia continues to expect global handset volume for the full year 2003 to grow by approximately 10%, compared with 405 million units in 2002. Nokia volume growth is expected to be stronger than market growth for the full year 2003.
Company sees increase in CDMA share
In line with Nokia's long-term target to become a leading CDMA mobile device manufacturer, the company started shipping four new CDMA phones in the second quarter, including the launch of the Nokia 3586i, Nokia's first CDMA phone with a color screen. The company also began shipments of CDMA phones in India, while in China received the CDMA manufacturing licence, and will commence CDMA production and sales there during the second half. The positive effects of this expanding product range and customer base enabled Nokia to see a second-quarter increase in its CDMA market share.
Mobile networks market remains slow
In the network infrastructure business, market conditions show no signs of improving. Operator investment has decreased to an exceptionally low level, and Nokia continues to expect the overall market to contract by 15% or more for the full-year 2003.
New business group to focus on enterprise solutions
Nokia is creating Nokia Enterprise Solutions, a new business group targeting the enterprise market.
Nokia Enterprise Solutions will bring together Nokia's various corporate activities from Nokia Mobile Phones and Nokia Ventures Organization with the aim of providing enterprises with a competitive, focused mobile device range and platform as well as secure connectivity solutions. The new business group will start financial reporting from the first quarter 2004.
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