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Nokia posts upbeat 4Q
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February 1, 2000: 8:01 a.m. ET
Finnish mobile-phone giant says quarterly profit rose 46%; eyeing News Corp. tie
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LONDON (CNNfn) - Nokia, the world's largest mobile phone maker, posted a 46 percent rise in fourth-quarter earnings Tuesday, in line with expectations, and said it was targeting sales growth of between 30 and 40 percent this year.
The Finnish company said fourth quarter net profit rose to 853 million euros ($826 million), or 0.72 euros a share, from 585 million euros, or 0.50 a share, a year earlier. Sales also climbed 46 percent, to 4.35 billion euros.
A 63 percent surge in mobile phone sales over the past year lifted full-year revenue by 48 percent to 19.77 billion euros. Profit for the whole of 1999 rose 47 percent to a record 2.577 million euros.
However, analysts noted a dip in fourth-quarter operating margins for Nokia's network business and questioned whether the company's shares could continue the performance which has seen them triple over the last 12 months.
"The key question for investors now is whether they think Nokia's mobile margins are sustainable or not," analyst Per Lindberg at Dresdner Kleinwort Benson told Reuters. "I don't think they are, because this is a commodity-like market in the long term, and Nokia will face much stiffer competition."
Shares of Nokia, which last year overtook Motorola as the global number one in cellphones, rose 4.7 percent to 194.2 euros in Helsinki, having earlier hit a record high of 197.4 euros. The past year has made Nokia the largest listed company in Europe by market capitalization, at 223 billion euros. It plans to split its shares, which are also listed in New York, on a four-for-one basis in April.
The stock was also boosted by a report that Nokia has been in talks with News Corp. about an alliance to distribute the media and entertainment giant's content via the next generation of Internet-enabled cellular phones.
Fourth-quarter sales in the handset business climbed 57 percent to 4.25 billion euros, with the operating margin rising to 24.9 percent from 21.5 percent a year earlier. The network business posted a 24 percent rise in sales to 1.74 billion euros, with the margin dipping 1 percentage point to 19.2 percent.
Nokia's performance follows an upbeat report last Friday from Sweden's Ericsson, the world's number three cellular manufacturer. The better-than-expected fourth-quarter and full-year earnings marked a recovery from a turbulent 1999 in which Ericsson lost its chief executive and suffered production problems.
While Ericsson's shares have recovered ground, they still trade on a price-earnings ratio 20 percent below that of the Finnish company, which earns far less of its revenue from network systems, traditionally a more profitable business. The price earnings ratio, which states a share's price as a multiple of the company's annual profit per share, is a tool investors use to assess a stock's relative cheapness.
"The likelihood of stumbling is much higher if [like Nokia] you have 80 or 85 percent of earnings coming from handsets rather than 5 percent in the case of Ericsson in the fourth quarter," added Lindberg.
Nokia also announced that it was buying California-based Network Alchemy for $335 million in stock. The company produces Internet network equipment. 
-- from staff and wire reports
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