Jul 19, 2001 12:00 PM,

Nokia Q2 net profit down 16%

Glenn Bischoff

Nokia today reported net profit for second quarter 2001 of $725 million (EUR 830 million), a 16 percent decrease from the $859 million (EUR 984 million) profit posted in the year previous. Earnings per diluted share for the quarter were 15 cents (EUR 17 cents), down from 18 cents (EUR 21 cents) year over year.

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Net sales for the quarter increased by 5 percent year over year, to $6.4 billion (EUR 7.4 billion). Leading the way was the mobile phone division, with a 10% increase to $4.7 billion (EUR 5.4 billion). Sales for the company’s networks division totaled $1.7 billion (EUR 1.9 billion), down 2 percent from the year previous.

Chairman and CEO Jorma Ollila blamed the economic downturn that is devastating the telecom sector for the drop-off. “In our first quarter conference call and during our recent strategy and vision road show, we highlighted 2001 as a difficult and challenging year for the telecommunications industry,” he said. “However, the extent of the challenges has exceeded even our expectations.”

Ollila added that Nokia’s performance in April was in-line with expectations, but as the economic slide spread outside the United States, it became clear by May that “we would no longer be able to meet those projections.”

He also indicated that market growth in the second quarter was “practically flat” across all technologies, and that the company’s position was weakened somewhat in the quarter due to backward compatibility issues in conjunction to the 1X/RTT network upgrade. Ollila said that those issues have since been resolved.

On the plus side, Ollila said Nokia’s 3G development is “proceeding as planned,” and the company will begin volume deliveries to its customers beginning in October. He added that shipment volumes of GPRS phones in the fourth quarter are expected to be in the millions.

And while Nokia expects that mobile phone market will show “little or modest growth” for the full year, Ollila said he anticipates his company will retain the better than 35 percent market share it garnered in first quarter 2001, “despite aggressive discounting by some of our competitors.”