Nokia investor meeting unlikely to spark new rally

Brett Young

HELSINKI: Mobile telephone powerhouse Nokia will tell investors next week how it plans to stay ahead of the curve in the coming year and outperform ever more competitive rivals emerging in Asia and around the globe.

But share price reactions are likely to be muted given the stock's phenomenal surge in recent months. Yet the power of Europe's leading technology stock to spark a global rally or sell-off among tech stocks promises to make the meeting one of the touchstone events of December's investment calendar.

Chief Executive Jorma Ollila, who is credited with turning Nokia into the world's largest and most profitable handset maker, is expected to comment on the company's and industry's growth prospects at an annual strategy meeting on Tuesday.

Some analysts also think Nokia will be tempted to give a whiff of its performance in the fourth quarter, the key Christmas sales season. The event will take place in Dallas, the heartland of the U.S. telecom manufacturing industry.

"We expect management to adopt a very positive tone at the analyst day, and while specific Q4 data may not be given, management seems likely to suggest that the quarter is tracking at least in line with broad expectations," investment bank Lehman Brothers said in a research note.

But with scant wireless market growth anticipated this year or next and Nokia shares already up 20 percent in three weeks ahead of next week's meeting, analysts said that the year-end meeting may not the major draw for investors it once was. Further gains are likely to level off, as shares of Nokia have risen more than 80 percent to 19.34 euros since its July low and outpaced its European rivals by a whopping 45 percent.

Instead, analysts expect management to go to the Bible Belt preaching the gospel that the firm's record number of phone launches offering color screens and picture messaging services will spark demand and offset sluggish global economic growth.

Nokia has already said it will give a detailed Q4 outlook during a mid-quarter update in London on December 10. And analysts don't expect the company to provide specific forecasts for 2003 performance until it unveils fourth-quarter results in January.

Nokia, stung in the past for forecasts that have proved to be overly optimistic, has once again turned positive of late, indicating that at least the Finnish company sees better times, if not the industry as a whole. Ollila, seen as the wireless industry's most important oracle, is likely to build on his recent comments that there is a good chance the global handset market will grow by up to 15 percent in terms of unit sales in the next three years.

Nokia itself has a target of more than 10 percent annual sales and earnings growth for 2003 and beyond -- a far cry from estimates of 25-35 percent it issued less than two years ago but gratifying when most other major European names in the sector are reporting flat to negative growth.

Two Problems

Analysts said they expected the company to put more meat on the bones of such forecasts, as well as give further details about how it plans to take handset market share in the one area that has remained the firm's Achilles heel- CDMA.

Nokia, the world's dominant supplier of phones based on so-called GSM technology has not matched that success with CDMA, the most popular U.S. mobile standard, and where most of the growth in hot Asian markets like Korea, China and Japan is expected near-term. Nokia must gain ground in CDMA to meet its goal of gaining a 40 percent share of the global market.

Nokia's current share of the global mobile handset market is around 36 percent, more than double that of nearest rival U.S.-based rival Motorola Corp., which is strong in CDMA. "The CDMA comments will be interesting because to reach and hold a targeted market share of over 40 percent, Nokia will need to come out with a lot of new models in the CDMA arena," said Opstock Securities analyst Michael Schroder in Helsinki.

While Nokia does not usually synchronize phone launches with its investor meetings, analysts said the fact that its Dallas meeting coincides with the 2002 CDMA Americas Congress may mean new phones are in the offing.

Analysts said the company may shed more light on what to do with its growing cash pile of some 12 billion euros (US$11.93 billion), a rarity in the current environment. Nokia wants to use some of it to buy its own shares, but is worried it could hurt its credit rating.

© Reuters