Nokia's Q2 earnings warning catches industry off guard

Nokia has sent a ripple through the wireless industry by reducing its second-quarter earnings to between 13 and 14 cents per share from the originally anticipated 17 cents per share. The company’s sales growth also is expected to fall below the 10% level for the quarter compared with its prior estimate of 20%.

Nokia said that the announcement has no bearing on any of its product shipment plans, including handsets and other third-generation products, said a spokeswoman for the company.

The company’s warning was derived after reevaluating the current state of the global handset market and the continued economic slowdown in the U.S. wireless communications sector, the spokeswoman added. Despite the anticipated slowdown of sales in the second quarter, the company expects to see a correction during the second half of 2001.

Analysts also expect the entire handset sector to remain weak for at least the next quarter but agree that sales will pick up during 2001.

According to a report from Global Information, third- and fourth-quarter handset sales should be favorable in 2001 and as a result make up for the less-than-stellar results during the first and second quarters in certain regions.

While First Union Securities considers Nokia’s announcement to be the “final nail in the coffin” for the sector for the remainder of the year, it expects the entire sector to remain weak for at least the next quarter. “Given the marked seasonality of handset sales in the calendar fourth quarter, we currently have no reason to expect good news for the sector for at least the next quarter,” the report said.

Nokia’s announcement not only caused its shares to fall about 20% this afternoon, but competitors Ericsson and Motorola also saw their shares drop as a result of the earnings warning.