Nokia modifies sales outlook

Shares in Nokia wobbled today as the world's largest mobile phone maker pared back its sales forecast for the second half of the year.

Although the Finnish firm reported pretax profits of 1.26bn euros (£808m) for the three months to June - a rise of 11% year on year - investors were nervous at the sales outlook.

Nokia said it would post second-half sales growth of between 3% and 10%, compared with a previous target of roughly 10% . Earlier this year Nokia had confidently predicted a growth rate of at least 15%.

The modified forecast reflects a second year of slowing sales, because financially hard-hit telecoms operators lack funds to upgrade their networks, while consumers are reluctant to buy new handsets in a saturated market. Nokia cut almost 7,000 staff last year, following reluctantly in the footsteps of its competitors and has trimmed overall costs by more than 10% year on year.

"You have to assume a really bumper fourth quarter for Nokia to get to their full-year (earnings) target," Susan Anthony of Credit Lyonnais told Reuters.

Nokia said it now expected only 400 million handsets to be sold this year, compared to a previous forecast of industry sales of up to 420 million units. The new target is in line with that of its nearest rival, Motorola. Last year, customers bought 380 million mobile phones worldwide. It was the first time since 1990 that phone sales had dropped year on year.

Under increasing pressure from rivals such as Motorola and Sony Ericsson, Nokia is banking on the recent launch of new devices, based on so-called multimedia messaging services (MMS) technology. Nokia, which controls 38% of the mobile market, hopes that the new models, many with colour screens, will rekindle high street interest.

But the company cast doubt on the outlook for the third-generation or 3G mobile phone market by saying it did not expect to start commercial shipments until early 2003. Previously it had said it would start shipments in the third quarter.

Nokia shares bounced up and down after its statement, falling 3% lower to 13.94 euros in morning trading after earlier rising 3%. Nokia shares have halved this year and the price is about 80% off its June 2000 peak.