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Nokia Cellphone Sales, Profit Slides In Q2

Helsinki, Finland —Nokia posted lower second-quarter phone sales and phone operating profit as it was hurt by slower sales of new cellphones that did not match the features or popularity of competing products, as well as by a price-cutting strategy that did little to win sales, but much to erode profits.

Nokia, the largest mobile phone maker, said second-quarter sales of cellphones slid 13 percent, down to $5.2 billion from $6 billion in the same three months a year earlier. Mobile phone segment operating profit dropped 39 percent in the second reporting period to $991.5 million from $1.6 billion a year ago. The company reported only moderate growth in North America during the quarter.

Selective pricing actions and market mix drove down mobile phone operating margin to 19.1 percent in the second quarter, compared with 27.2 percent in the year-ago period. Unit sales in the three months were 45.4 million, while global mobile device unit sales came in at 148 million. Nokia’s market share decreased to 31 percent in the three months, down from 39 percent in the same period in 2003, said the company.

Nokia, which expects its profitability to come under pressure in the second half, said it will continue to cut prices to gain market share. This tactic should offset any gains from new product introductions. Consolidated third-quarter sales are expected to range from $8.2 billion to $8.5 billion, compared with $8.6 billion in the third quarter of 2003.

Consolidated Nokia sales in the second quarter, ended June 30, dropped 5 percent to $8.3 billion from $8.7 billion year-over-year. Net profit for the three months rose 14 percent, reaching $885.8 million, up from $776.3 million in the same quarter last year.

In contrast to Nokia, Sony Ericsson, the 50-50 joint mobile phone venture between the Japanese and Swedish companies, enjoyed a 55 percent second-quarter jump in unit shipments and a 34 percent increase in sales, compared with the same period last year.

Units shipped hit 10.4 million, a 55 percent increase for the three months, while sales rose to $1.9 billion, compared with $1.4 billion year-over-year. Net income climbed to $110.7 million in the second quarter, compared with a loss of $109.5 million in the same period in 2003.

Sony Ericsson reported its fourth consecutive quarterly profit, which it said reflected an innovative product line, including a high-resolution digital camera and phone combination.

The company expects global phone shipments to reach 600 million units in 2004, up from an earlier forecast of 550 million units.