Thursday, April 21, 2005

Nokia Sees Overall Mobile Device Market at 740 Million Units for 05

Nokia now expects the overall mobile device market for 2005 to reach about 740 million units, compared with its previous estimate of approximately 10% annual growth, from an estimated 643 million units in 2004. The overall market is also expected to grow in value, but to a lesser extent. Volume growth is expected to continue to be driven by replacement and upgrade sales in more developed markets, with the availability of new features, services and cameras, and by new subscriber growth in developing mobile markets. In infrastructure, Nokia continues to expect the overall market in 2005 to be slightly up compared with 2004 in EUR terms.

According to Nokia estimates, year-on-year volume growth for the mobile device market in the first quarter came in ahead of expectations at 20%, with Nokia growing at about the same pace as the market. Despite some weakness in 3G devices at the industry level, this marked a strong start for the year.

Nokia's first-quarter 2005 net sales increased 17% to EUR 7.4 billion, compared with EUR 6.3 billion in the first quarter of 2004. At constant currency, group net sales would have increased 19%. All business groups contributed to the year-on-year sales growth.

Nokia's first-quarter operating profit grew 10% year on year to EUR 1.1 billion, compared with the first quarter 2004 (EUR 1.0 billion) with an operating margin of 15.1% (16.1%).

Operating cash flow for the quarter ended March 31, 2005 was EUR 1.3 billion, compared with EUR 0.9 billion in Q1 2004, and total combined cash and other liquid assets were EUR 12.6 billion, compared with EUR 11.5 billion at 31 December 31, 2004. As of March 31, 2005, net debt-to-equity ratio (gearing) was -94%, compared with -79% at December 31, 2004.

For the first-quarter 2005, the total mobile device sales volume achieved by the Mobile Phones, Multimedia and Enterprise Solutions business groups reached 53.8 million units, representing a year-on-year rise of 20% and a sequential decline, mainly due to normal seasonality, of 19%. Overall market volumes for the same period reached an estimated 170 million units, representing 20% annual growth and a 13% sequential decline. In smartphones, the total industry volume for the first quarter reached an estimated 10 million units, while Nokia's own smartphone volumes grew to 5.4 million units, compared with 1.8 million units in the first quarter 2004.

Global mobile subscription growth also continued, as total global subscriptions rose to an estimated 1.8 billion by the end of the quarter, backed by the ongoing strong momentum in new growth markets such as India, Russia, China and Brazil.

Nokia's year-on-year volume growth in China was positively affected by stronger seasonal market growth in the first quarter, and our expanding distribution system, competitive product portfolio, brand strength and quality products. In Europe/Middle East/Africa, market growth in the first quarter 2005, particularly in new growth markets, combined with an improved product portfolio, drove Nokia volumes, compared with the first quarter 2004.

However, in North America, and now in Latin America, Nokia's year-on-year volume decline primarily reflected operator migration from TDMA, which was a strong market for us in the first quarter 2004, to GSM and CDMA, where the company's relative position is not as strong.

Nokia's estimated market share for the first quarter was 32%, flat year on year and down compared with 34% in the fourth quarter 2004. Strong sequential market share gains in China, followed by Europe/Middle East/Africa, were more than offset by substantial market share losses in North America and Latin America. The seasonal strength of the Korean and Japanese markets in the first quarter 2005 also adversely impacted our market share, as Nokia does not have a material presence in those markets.

The average selling price for Nokia's mobile device business was EUR 110. This was supported by proportionally higher sales of high-end products from our multimedia and enterprise businesses in the first quarter 2005.