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HELSINKI - Nokia, the world's top cell phone maker, cut its profit margin forecasts but remained more upbeat than analysts as it unveiled thinner models to face stiff competition and slower market growth.
Nokia joined market analysts in forecasting slower growth for the global mobile phone market in 2007, expecting unit shipments to grow by up to 10 per cent from this year, compared with a forecast of just over 10 per cent issued by researchers at Gartner last week.
"We expect the volume growth in 2007 to be above 15 per cent in Asia Pacific, China, and Middle East and Africa, and below 10 per cent in Europe, Latin America and North America," Nokia said in a statement today. In 2006, mobile phone shipments are set to rise 21 per cent, according to Gartner.
Nokia cut its target for group operating profit margin for the next one to two years to 15 per cent from an earlier 17 per cent, citing rising exposure to the infrastructure business after merging its networks unit with Siemens from the start of 2007.
"It is not really that bad news. The consensus (analyst forecast) was 13.5 per cent for 2007 and 13.7 per cent for 2008 anyway," said Cheuvreux analyst Peter Knox. "What I find slightly disappointing is the market growth forecast for next year of 'up to' 10 per cent."
Shares in Nokia closed 1.4 per cent lower at 15.30 euros in Helsinki. The DJ Stoxx European technology sector index was down 0.8 per cent.
Nokia said some price pressure meant that revenue growth for the industry would be less than the 10 per cent volume growth but that Nokia's growth could be higher than average because it expected to increase its market share in 2007.
It currently has a global market share of 35.1 per cent in mobile devices, up from 32.5 per cent a year earlier, and Chief Financial Officer Rick Simonson said an increase of one percentage point or more would be reasonable to expect.
The market share gains in 2006 came mostly from cheap handset sales in emerging markets, which caused a severe drop in the average price per phone sold, but for next year Nokia also expected market share increases in higher-margin products.
"It's important that it will not be the low end only. In the mid-range I see a lot of upside, because of our lower market share there," Nokia Chief Executive Olli-Pekka Kallasvuo told reporters. "So (market share gains) will be in all price points, segments and geographies."
His confidence was underpinned by several new models.
Nokia unveiled four new models, including a thin 6300 model to compete with thin phones from Motorola, which pioneered thin design with its Razr, and Samsung Electronics Co.
At 13.1 mm, the new 6300 phone is on a par with most thin models from Nokia's smaller competitors. The phone has a 2 megapixel camera, MP3 player and battery lasting up two weeks.
"Many thin products have inferior features but are still successful due to the vanity factor. The consumer now says: we want thin and functionality. Beauty and brains," said Niklas Savander, technology and design executive vice president.
Nokia Mobile Phones unit head Kai Oistamo flashed a new ultra-thin, low-priced phone, code-named "Barracuda", which is set to start selling in 2007.
Due to strong competition and above-average sales growth of cheap phones for emerging markets, the company also trimmed its operating profit margin for its two biggest units: Mobile Phones and Multimedia.
It now expects a 17 per cent operating profit margin for the units for the next one to two years, compared with an earlier 17 to 18 per cent target.
Analyst Ed Bell at broker Cazenove said the market had expected Nokia to trim its margins and that 17 per cent was still above what most analysts expect Nokia can achieve.
CFO Simonson called the target "aggressive but achievable".
Seventeen per cent is also well above its rivals' and above analysts' forecasts, and investors were pleased that Nokia was still bullish in the face of slower market growth and hefty competition, especially in its home market of Europe, where it has been less successful in retaining demanding consumers.
"That is pretty interesting, a pretty bold move. They believe in themselves. The previous quarter was pretty soft because of product mix, with lower margins," said FIM Securities analyst Jussi Hyoty.
Nokia said it expected telecoms network gear markets to grow some 5 per cent next year, boosted by growing demand for services from operators.
- REUTERS
