Nokia Reports Declining Sales

Nokia says that its first-quarter sales of US$7.4 billion declined by 3% compared with the first quarter 2002, reflecting continued weakness in the company's network infrastructure business. First-quarter pro forma operating profit for the Nokia group showed a slight year-on-year decline to US$1.3 billion. This included a gain of US$61 million in 1Q 2003 from the sale of the remaining shares of Nokian Tyres.

Mobile phone sales rose by 1% year on year, within previously stated guidance, reaching US$5.98 billion. Strong sales growth in Europe was virtually offset by somewhat slower sales in Asia Pacific and substantially weaker sales in the Americas. The company's focus on operational efficiency continued to drive profitability at Nokia Mobile Phones, with pro forma operating profit in the first quarter rising 9% year on year to US$1.4 billion and mobile phone margins continuing at very healthy levels of 23.9%.

Overall mobile phone market volumes during the first quarter grew year on year for the fourth consecutive quarter, rising by 10% to approximately 98 million units, while Nokia's own volumes grew by 13% to around 38 million units, marking faster-than-market growth. In the second quarter, the overall global handset market is expected to grow year on year and be sequentially up. Full-year 2003 global handset volume is expected to grow by approximately 10%, compared with 405 million units in 2002.

In Nokia Networks, first-quarter sales declined by 15% year on year to US$1.3 billion, reflecting lower sales in Europe and Asia Pacific only slightly offset by increased sales in the US. Nokia Networks reported a pro forma operating loss of US$138 million, reflecting lower sales volumes and continuing high costs related to the first-phase implementation of 3G technologies.

Against this backdrop, Nokia is taking actions to reduce costs and improve profitability. In February, Nokia Networks announced plans to reduce the number of its R&D sites globally, affecting approximately 550 jobs. In April, Nokia Networks announced further reductions across all its functions, involving approximately 1 800 employees.

Jorma Ollila, Chairman and CEO commenting on the results said "During the first quarter 2003, we were pleased to see mobile phone market volumes growing year on year for the fourth consecutive quarter, rising by 10% to approximately 98 million units. Nokia's own volumes grew by 13% to around 38 million units, marking faster-than-market growth. Again, profits in our mobile phone business exceeded our expectations, rising 9% on very healthy margins of 24%. With this strong performance from our mobile phones, we succeeded in substantially reducing the impact of difficult operating conditions in our network infrastructure business and were able to post solid overall first-quarter results."

"Mobility has a lot to offer, and together with our operator customers we are providing consumers and companies a growing range of products to enhance the already rich world of mobile communication. In early 2003, we began seeing an increased impact of color and multimedia on the mobile phone market. While the network market remains very difficult, we have announced strong abative measures in our network infrastructure business to bring down costs and improve operational efficiency and profitability."

Posted to the site on 18th April 2003