Nokia Corp. executives told analysts and press today that holiday-quarter handset sales will likely fall short of the company’s last estimate, given less than three weeks ago. Even with its much-vaunted visibility into the global market, however, Nokia declined to give clear guidance for 2009.
The upshot: Market conditions may be changing too rapidly to make a rational forecast worth sharing.
Yet investors appeared relieved by Nokia’s frank assessment of the current quarter, sending the Finnish handset giant’s stock up more than 5% in morning trading.
As recently as Nov. 14, Nokia projected global handset shipments this quarter of 330 million units and today said only that volumes weren’t likely to reach that level, noting slowing demand in emerging markets. In mid-November, Nokia also projected 5% or more negative growth for the industry next year.
Nokia CEO Olli-Pekka Kallasvuo said that some consumers may actually trade down when they replace their current handset, according to Reuters. That’s remarkable, in that the act of replacing one’s handset is typically referred to in the industry as “the upgrade cycle.” The CEO also said the company was cutting costs, but provided little detail.
What struck observers, however, was Nokia’s inability or unwillingness to provide much detail on the year to come.
“What is likely to be concerning to investors is the lack of clear guidance for 2009,” wrote analyst Ittai Kidron at Oppenheimer, in a note to investors.
Nokia did not give specific guidance on its operating margin goals, either, according to Kidron.
Clear as mud
And if Nokia itself is struggling to provide clarity for the year ahead, analysts are toiling, too.
“While 2009 guidance is consistent with our expectations, poor visibility makes forecasting 2009 extremely problematic,” said analyst Maynard Um at UBS.
Still, analyst Mark McKechnie at Broadpoint.AmTech said that despite Nokia’s “limited visibility,” he was somewhat relieved at today’s news.
“We are encouraged that Nokia has taken down the bar, which hopefully will mitigate the industry overbuild effects in 2009,” McKechnie wrote in a note to investors.
Numerous analysts noted today that mobile semiconductor vendors, including Qualcomm Inc. and Texas Instruments Inc., have already dampened their fourth-quarter forecasts. And Taiwan Semiconductor Manufacturing Co., which fabricates a significant slice of mobile chips for multiple mobile chip vendors, just cut its fourth-quarter revenue projection by nearly 30%. That was the first downwardly revised forecast by TSMC in seven years, according to the Wall Street Journal.
Nokia’s Capital Markets Day was held today in Brooklyn, which several observers said was a less costly locale than Manhattan, indicating that even its delivery of a dampened forecast was itself designed to save money.
