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Nokia dials up 3Q surprise
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October 19, 2000: 1:47 p.m. ET
Finnish cell-phone titan posts 42% rise in profit as sales soar in Asia, Europe
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LONDON (CNNfn) - Nokia Oyj, the world's biggest mobile-phone maker, posted Thursday a 42 percent jump in pretax earnings in the third quarter, surpassing analysts' lowered estimates and driving its shares up as much as 28 percent after weeks of decline for stocks in the sector.
The Finnish company, which also predicted record results for its fourth quarter, said pretax income rose to  1.34 billion ($1.14 billion) from 937 million a year earlier. Sales ballooned 50 percent to 7.58 billion, largely because of fast growth in handset sales in Europe and Asia.
Nokia said net profit rose 40 percent to 892 million, or 19 cents per diluted share, from 638 million, or 13 cents per share, a year earlier.
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Jorma Ollila, CEO of Nokia, chats with CNNfn about the profits.
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The better-than-expected result came three months after Nokia (NOK: Research, Estimates) advised analysts to lower their estimates for third-quarter earnings, a warning that triggered a 25 percent one-day plunge in the shares. Analysts said that delays from component suppliers were largely to blame for that warning.
Nokia's American depository receipts (ADRs) soared $8.44, or 28.1 percent, to $38.44 in New York Stock Exchange trade after the announcement, which was made in Helsinki before the U.S. markets opened.
"This was a strong set of numbers -- we had a pretax estimate of 1.184 billion," said Doug Smith, a telecom equipment analyst at CS First Boston, who has a "strong buy" rating on Nokia shares. "Clearly Nokia has gained in market share."
"What's all the fuss about in terms of this third quarter earnings warning?" said Howard Wheeldon, an analyst at Prudential Bache Securities. "By any standard, these are very, very good results."
Shares under pressure
Investors in recent months have beaten down shares of many of the top companies in the telecom equipment industry. Analysts cited a recent earnings warning from U.S.-based semiconductor and cell-phone company Motorola (MOT: Research, Estimates) and comments from AB Ericsson -- Nokia's closest European rival -- that its handset sales were lackluster in its latest quarter.
 After it reported its latest results last week, Motorola reduced its fourth-quarter earnings estimate to 27 cents per share, 10 cents lower than previous expectation. For 2001, the company forecast earnings of $1.20 per share and sales of $44 billion. Analysts had expected the company to turn a profit of $1.44 per share in 2001.
Executive at Motorola in Schaumburg, Ill., blamed slower growth in mobile phone sales and weakness in the euro for the shortfall.
But Nokia's latest results suggest the Finnish cell-phone leader has insulated itself from the pressures affecting its rivals, building market share in its core handset business.
"[Nokia] has been getting a lot of questions because of the results of other companies such as Motorola, suggesting the market for mobile phones was going to be weak," said CS First Boston's Smith. "I think that they wanted to come in ahead of what Ericsson is going to do tomorrow -- and [Ericsson] has said its handset sales haven't been that great."
"This is a totally different story from anyone else in the sector," said Helsinki-based analyst Mike Paloranta at ArosMaizels. "Problems with the others in the sector are clearly specific to just them."
Ericsson regards mobile-phone network infrastructure rather than handsets as its core business. The Swedish firm's handset division has fallen into the red, and it has warned that if its performance doesn't pick up, the company may seek to outsource the business.
When Ericsson (ERICY: Research, Estimates) reports its latest results Friday, analysts polled by earnings tracker First Call expect the company to show a profit of 4 cents per share, which is the same amount it earned during the same period last year.
Nokia originally had been expected to report its results next week. Analysts said the battering that mobile-phone makers have suffered in recent months, and Friday's imminent earnings report from Ericsson, brought forward Nokia's plans.
Outlook remains strong
There has been a split body of opinion developing on Wall Street recently about global demand for wireless handsets. Some have said it is slowing, that it is slowing, while others are expecting it to continue strongly throughout the remainder of the year.
 Jorma Ollila, Nokia's chief executive, told CNNfn Friday he doesn't see it that way. He said the solid third-quarter results gives him confidence that Nokia will achieve its fourth-quarter profitability and market share targets.
"The way the third quarter shaped up really is really proof that the growth we had in the first half of this year is continuing well into the second half," Ollila said.
Ollila also said he expects Nokia to continue to be the dominant player in the wireless phone industry and in fact extend its lead over its competitors. [263K WAV or 263K AIFF]
Ollila also reaffirmed Nokia's forecast that over 400 million mobile phones will be sold globally in 2000 by all producers, bringing the total number of users to 700 million by year-end.
In 2001, he said Nokia expects 550 million phones will be sold.
Ollila also reiterated the company's estimate of one billion handsets to be sold worldwide by all producers in 2002, echoing similar forecasts by rivals.
Shares of Nokia's competitors also got a lift from the news in afternoon trade Thursday. Motorola rose $2.12, or 10.2 percent, to $22.88. Ericsson gained $1.19 to $14.56, an 8.9 percent advance on the day. 
-- Reuters contributed to this report
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